Moody’s Investors Service, in a new report, says the pace at which distributors are replacing lost video subscribers with broadband customers slowed in the first quarter of this year.
Moody's Video Replacement Rate (VRR), a ratio which measures that pace, fell to 3.9x in the first quarter, compared to 4.7x in the fourth quarter of 2017, for rated-US cable companies. Comcast led in the first quarter with a 13.6x VRR, while WideOpenWest Finance had the weakest rate at 0.4x.
"The VRR is an important metric to monitor as it signals how well a company is managing the secular shift towards broadband," said Moody’s VP-senior credit officer Jason Cuomo in a statement. "As the sector continues to shift more heavily toward broadband subscribers (now at 1.3x video), the superior economics of broadband has greater influence on the overall business model."
Broadband subscriber growth decelerated by 200 basis points in Q1, to 4.5%, driving the VRR lower, according to Moody’s. The decline was driven by Comcast and Charter, which posted broadband growth of -0.3% and -0.5%, respectively, and represent nearly 80% of the sector's subscriber count.
"Video churn remains troubling, with conditions worsening for the last 6 quarters, falling persistently from -0.6% in Q3 2016 to -2% in Q1 2018," notes Cuomo.
Meanwhile, the sector's revenues grew 4.1%, down 200 basis points from the prior quarter, while EBITDA growth fell to 6.1% from 6.8%. Moody's projects the VRR will continue to fall, suggesting revenues and EBITDA growth will drop even further.