Can a pay TV operator with less than 5 million subscribers make it in today’s video business?
As this chart compiled by equity research company Cowen reveals, scale certainly means a lot. For Altice USA, which finished the first quarter with just under 3.3 million video customers, programming costs consume 80% of total revenue.
UPDATE: Altice USA said Cowen's tally of $813 million for first-quarter program licensing costs is actually the wrong figure. The correct figure, according to the cable operator, of $682.4 million puts Altice largely in line with other tier 1 pay TV operators at 67% of video revenue. But the chart still shows the impact of subscriber scale on programming costs.
For Comcast, which finished Q1 with around 21.8 million video customers, program licensing accounts for about 60% of revenue.
Below Comcast, Charter Communications and Dish Network—which finished Q1 with 16.4 million and 9.6 million video subscribers, respectively—pay 65% of their revenue in programming costs.
Notably, it’s still going up for everyone.
According to Cowen, programming costs represented 73% of revenue in the first quarter of 2016. The figure was around 53% for Comcast at that time.