Housing Rebound Could Lift Cable

Analyst Sees Brighter Days in Second Half of 2013
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NEW YORK — Bank of America/Merrill Lynch media analyst Jessica Reif Cohen said a rebound in the housing market could help kick-start the economy and spell much better days for cable companies in 2013.

At the Multichannel News/Broadcasting & Cable OnScreen Media Summit here last week, she stopped short of predicting that cable operators will cross into positive video subscriber growth next year, but said that losses that have plagued the industry for years will continue to decline.

“We haven’t had the benefit of housing growth in years,” Reif Cohen said. “That will be a huge positive for the pay TV industry in general, and cable specifically.”

Looking at the big picture, the analyst said, Bank of America/Merrill Lynch is bullish on the overall economy — the promise of renewed housing growth, continued low interest rates and a strong banking sector should translate into overall gains, especially in the second half of the year.

High programming costs will continue to divide operators and content providers, Reif Cohen said, adding that average retransmission-consent fees will continue to rise.

“This round of contracts will end at $1 [per subscriber per month], the next round will start at $1.50 or $2,” Reif Cohen said. “There is no doubt that retrans costs are going up.”

The advent of reverse compensation — where affiliate stations pay the networks a portion of their retrans fees — will only drive the price up higher, she added.

While programming has been a sore point for many operators — Time Warner Cable chairman and CEO Glenn Britt last week said he would drop costly channels that don’t perform — Reif Cohen said some other networks that have been receiving low fees are due for a raise.

The market for cable systems should also rebound next year, with several deals expected. Already, Cablevision has singled out its Optimum West division — the former Bresnan Communications — for sale, Reif Cohen said.

“In the next couple of years we should see a lot of activity,” Reif Cohen said. “Balance sheets in 30 years have never been stronger.”

Reif Cohen also was bullish on The Walt Disney Co.’s recent agreement to license its feature films to Netflix, beginning in 2016.