Love’s Lost With Subs

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Here’s a headline from a July 29 report on Comcast by Merrill Lynch’s Jessica Reif Cohen: “No Love Despite 21% EBITDA Growth.”

That pretty much sums up what the summer’s been like for cable stocks. The positive numbers from the second quarter that Comcast racked up — besides the EBITDA uptick, they include 327,000 high-speed Internet adds and 206,000 new digital customers, all ahead of Cohen’s forecasts — just couldn’t get anyone excited.

Darn those 96,000 basic-customer losses!

Yes, the satellite guys had opposite results as far as basic gains or losses went. DirecTV added 450,000 subscribers or so, months before marketing for the “NFL Sunday Ticket” package kicked in, and Dish Network followed with 340,000 net adds. Collectively, the satellite industry is now at 23% market share of multichannel-video homes.

Obviously cable isn’t about basic growth anymore, but that’s been true for years. It’s equally apparent that competition is heating up in a big way, probably the biggest drag on the stocks. In New York, where most of the analysts reside, Verizon inserts digital subscriber line fliers into home-delivered copies of The New York Times a couple of times a week. TV ads for satellite providers and cable companies directly bash each other at an increasing rate. A Time Warner ad I saw last week for the first time ended with some poor guy up on the roof sledge-hammering his dish because he couldn’t make it work with HDTV. (At least it wasn’t raining.)

So, raise the DBS expectation level to 30% and go from there.

There’s still lots of growth ahead, evident in the HSI gains (despite DSL growth) and in such new statistics as Cablevision’s 44,000 additional digital phone customers. Cablevision also had what Cohen called impressive growth in average revenue per customer (ARPU) on the video side (up 10%, to $60.77) and for data services (up 12%, to $41.59).

Cox’s double-edged maneuver on HSI — pumping up speeds for “classic” customers and creating a “value” product at slow speeds to lure dialup users — should also spread among those companies now just raising top-end speeds to secure their bases. (My struggling provider, RCN, has raised my cable-modem download speed to 7 Megabits per second.) It might prove a good way to bring in revenue from non-video customers, and a good way to upsell them once they’re in the fold.

That was another interesting tidbit from the analysts’ reports. Cablevision’s non-subscriber targeted $89.95 triple-play offer — another one of those negative catalysts for these competition-sensitive stocks in recent weeks — had little effect on second-quarter numbers, but Cablevision said customers ordering it actually averaged $110 in monthly payments because they bought more video options later, Cohen said. The offer’s been extended at least through August.

With or without Wall Street love, cable’s finding some encouraging numbers. Once you get past the basic-sub losses.

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