Ready to Get Battered


The cable industry should be prepared to weather a recession that will last until 2010, Jessica Reif Cohen, Merrill Lynch first vice president and managing director, said on the closing panel session at the CTAM Summit ’08 here last Tuesday.

“I know the perception is that cable is recession-proof. Its business tends to hold up better … but it’s not recession-proof,” Reif Cohen said.

Merrill Lynch is forecasting negative economic growth for the first three quarters of 2009, flat growth in the fourth quarter, with the first positive quarter the first quarter of 2010. The current recession began in the second quarter of this year, she said.

Businesses better suited to withstand economic slowdowns have strong cash flow and are self-financing — and “cable fits that bill very well,” Reif Cohen said. Cable stocks historically recover more quickly than the broader economy, too, two to three quarters after a recession has begun.

But the effect on cable in past recessions has been a slowdown in net subscriber additions. In the early 1990s, for example, net adds slowed by 50%. “The net adds slowed down and it took two years to get back to trend line. That’s our expectation now,” she said.

The advertising sector will likely be hit harder, Reif Cohen said, and take longer to recover. Media stocks don’t recover until a quarter or two after the recession is over, she said.

Discovery Communications CEO David Zaslav said his company’s advertising business has slowed down some in the fourth quarter “but we’re holding our own.” The company generates about half its revenue from advertising.

“The value of cable has made us maybe the last man standing in the media business,” Zaslav said, but he added that if the economy worsens Discovery will be affected as well. “We’re looking into next year and we’re pretty cautious.”

Advertising on VOD is another category that holds promise, Zaslav said. “We’d be very happy to give all our content on VOD” if it could be monetized so both distributors and networks could benefit, he said.

In the absence of comprehensive VOD services, consumers turned to DVRs, Zaslav continued. “The reason the DVR exists is because they don’t have to ask permission,” he said.

Before the panel, Cablevision Systems chief operating officer Tom Rutledge accepted the Grand TAM award, the trade group’s highest honor, saying he was “happy to finally be recognized by marketers.”

Rutledge said Cablevision employees love to sell cable services — and pointed out that they’re intensely competitive.

“Everyone who works at Cablevision knows that the only satellite dish we want to see in our territory is on the side of the house that the neighborhood kids think is haunted,” Rutledge said.