Cable Industry ‘Strikes Back’ at Cord-Cutting in Third Quarterby
Comcast, TWC, Charter all surpass estimates for video users
`Time to change the narrative about cord cutting:' Moffett
The cable industry, plagued by cord-cutting for years, is fighting back.
Comcast Corp., Time Warner Cable Inc., and Charter Communications Inc. all exceeded analysts’ expectations for their third-quarter video businesses, countering a trend of precipitous decline in traditional pay-TV and reclaiming market share from some telecom carriers and satellite-TV providers.
Charter, which posted its first profit in seven quarters Thursday, even managed to gain cable subscribers.
So-called cord cutters, who quit paying for pay-TV packages of hundreds of channels and favor online streaming services like Netflix Inc., are undermining a business model that has sustained the cable industry for decades. While the industry as a whole will continue lose subscribers, the cable companies are responding to the threat: Most are offering cheaper bundles of cable, Internet and digital phone service, and Comcast is accelerating its roll-out of a new technology that allows subscribers to watch and store shows and movies on multiple devices.
“It’s time to change the narrative about cord cutting,” Craig Moffett, an analyst at MoffettNathanson LLC, said Thursday in a note titled “Charter Q3 Earnings: Cable Strikes Back.” “Yes, the pay-TV industry is slowly drip, drip, drip declining,” he said. “That cable was actually holding its own was at best a secondary narrative.”
The third-quarter resurgence after a disastrous summer quarter of record subscriber losses was led by Comcast, the nation’s largest broadband Internet service provider. Since abandoning its $45.2 billion plan to buy Time Warner Cable in April, Comcast has focused on retaining video customers by rolling out a new cloud-based X1 platform to more homes. The Philadelphia company this week reported that it lost 48,000 cable-TV subscribers in the quarter, its best showing in nine years. Three analysts surveyed by Bloomberg had projected an average drop of 66,000.
Charter, which is awaiting approval to buy Time Warner Cable, also had an impressive quarter. The company added 12,000 residential video subscribers in the quarter, while analysts anticipated a gain of 10,200.
And Time Warner Cable, the perennial takeover target, lost just 7,000 cable users when analysts anticipated a major decline of 113,000.
“Cable operators’ turnaround efforts are gaining momentum,” Bloomberg Intelligence analyst Paul Sweeney said in a note Thursday.
Cable operators also have been performing better than their satellite and telecom peers in the past few quarters, Sweeney said.
In the third quarter, Verizon Communications Inc. gained 42,000 FiOS TV customers. AT&T lost about 92,000 U-verse TV subscribers, and its new acquisition, DirecTV, added 26,000 subscribers.
The broadband picture looks bright for the cable companies as well. Comcast, Time Warner Cable and Charter added 320,000, 232,000 and 131,000 Internet subscribers, respectively, in the third quarter. Meanwhile Verizon added 114,000 FiOS Internet users and AT&T added 172,000 U-verse broadband customers.
Analysts at Evercore ISI said in a research note Thursday that while the third-quarter results are a “positive read-through to media companies,” so-called skinny bundles -- discounted packages with fewer channels -- “played some part in the quarter’s success.”