New Negative Metric: Costs Per Subscriber


While programming costs
have risen at a predictable rate for
the country’s two largest cable operators
over the past two years, a
steady decline in video customers
translates to a quicker rise in costs
per subscriber.

Time Warner Cable chairman and
CEO Glenn Britt mentioned that disparity
at last week’s Goldman Sachs
Communacopia conference.

While TWC’s overall programming costs rose 6.5% in
2009, programming costs per subscriber increased by 8.3%
that year. In 2010, it is estimated that programming costs
per subscriber will rise 9.7% while overall programming
costs rise at a steady 6.5%.

The culprit is continued video customer losses, Britt
said. TWC lost about 104,000 basic video customers in
2008, 210,000 in 2009 and so far this year has shed about
157,000 basic-video subscribers. Analysts expect the
second-largest cable operator to lose about 377,000 basic
video subscribers in 2010.

At top cable company Comcast, programming costs rose
about 8.8% in 2009, while per-subscriber costs increased
11.6%. For 2010, it is estimated that programming costs per
subscriber will rise about 12.3% if overall programming increases
remain steady at 8.8%.

Pointing to per-subscriber levels allows cable companies
to highlight that programming costs play a large role
in overall rate increases, which can have a public-relations

But the subscriber losses themselves were more on the
minds of TWC investors last week. Since chief fi nancial officer Rob Marcus said on Sept. 15 that primary service-unit
growth (a combination of basic video, voice and data customers)
could turn negative in the third quarter, mainly
due to declines in new home growth, the MSO’s stock price
has fallen 6% ($3.28), to $51.65 on Sept. 23 from $54.93.
Britt’s remarks at Communacopia added to the decline.

At right, a closer look at subscriber trends at the top two