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Cable Wi-Fi

Cablevision Battles More Sub Drops

Still resisting the urge to engage in price wars with Verizon, Cablevision Systems suffered some of its worst subscriber losses ever over the summer months but managed to boost its revenues and earnings nonetheless.

Cablevision Systems Corp. (NYSE: CVC) reported consolidated net revenues of $1.63 billion in the third quarter, up 3.7% on a year-over-year basis and slightly higher than the Wall Street consensus forecast. The company's consolidated adjusted operating cash flow (AOCF) climbed 6.9% to $472 million while its consolidated operating income rose 12% to $252 million, also beating the consensus forecasts.

Cablevision executives credited the financial gains to rate increases, "continued disciplined pricing strategies" and higher advertising revenues. They also credited lower customer service costs as they continue to focus on reducing service problems and cutting the number of "truck rolls" to subscribers' homes. "We're pleased with our progress but our work is not done," said Cablevision CEO James Dolan on the company's earnings call Thursday morning.

But, while Cablevision's financial numbers for the third quarter look healthy, its subscriber numbers do not. The company, which is the fifth-largest US MSO with more than 3.1 million total cable customers in the New York metro area, shed subscribers across the board for the second straight quarter, losing 56,000 video, 33,000 voice and 23,000 broadband subs, respectively. As a result, its overall number of customer relationships fell by 36,000 as Verizon Communications Inc. (NYSE: VZ) maintained its relentless assault on the cable operator's market with its family of fiber-fed FiOS services.

Notably, all these losses were higher than Cablevision suffered in the second quarter, which is usually the worst of the year for cable operators because of seasonal moves by subscribers. They were also higher than Wall Street expected and worse than what the company experienced in the summer of 2013.

Perhaps worse yet, Cablevision, unlike most of its major US MSO peers, lost broadband subscribers for the second straight quarter even though it and other cable operators view broadband as the industry's brightest star right now. Due to these declines, Cablevision actually closed out September with 18,000 fewer high-speed data subs than it had a year ago, raising red flags for analysts concerned about its growth prospects.

"Remember, this [broadband] is the growth engine of the business," wrote Craig Moffett, a principal in MoffettNathnson Research, in a critical note to clients earlier today. "If anyone thought last quarter's dip into YoY [year-over-year] decline was a seasonal anomaly, think again."


Want to know more about pay-TV subscriber trends? Check out our dedicated video services content channel here on Light Reading.


On the earnings call, Cablevision officials defended their subscriber performance, arguing that they are deliberately letting customers with bad debt records and poor credit leave for Verizon's clutches. Instead of trying to lure those consumers back with discounted price offers and other sweeteners, officials said, they are tightening up credit policies and cracking down on delinquent subs.

"We no longer invite subscribers who have a tradition of non-payment," said Cablevision COO Kristin Dolan, who is married to her boss. "We don't want to invite people into the store if they're going to shoplift."

Going on the offensive against Verizon, an angry James Dolan accused his company's chief rival of pumping up FiOS' subscriber totals and market share in the New York area at the expense of all else. "Verizon continues on the path of pursuing destruction of their own capital," he declared. "We don't believe they are profitable on any level in our service area. They just rabidly pursue us in an attempt to get customers. And we're giving them all the customers who are the most expensive customers."

Despite their slumping broadband subscriber numbers, Cablevision executives said they remain tightly focused on boosting broadband as their prime business. In the third quarter, the company introduced two new tiers for its high-speed data service, including a new, low-priced Internet Basic product designed for low-income consumers, older people and light Internet users. (See Cablevision Looks to Data as Great Savior.)

Further, Cablevision officials boasted about their performance on the WiFi front, where they have already deployed more than 1 million hotspots in the New York area and seen customer usage figures soar. Like Comcast Corp. (Nasdaq: CMCSA, CMCSK), Cablevision is now busily installing powerful dual-signal wireless data gateways in every broadband subscriber's home, potentially turning each home into a public hotspot.

"We think it can go much deeper than 1 million," James Dolan said. "Our ultimate goal is to have WiFi available everywhere."

As he has on recent several earnings calls, Dolan strongly hinted that Cablevision will soon unveil ways to monetize its huge investment in WiFi. While he still declined to offer details, he indicated that the company will likely focus not on direct usage fees but on "getting customers to recognize the value" of WiFi service.

"That [monetization] is the trick of it, isn't it?" he said, promising to reveal more on the company's next earnings call. "We have some plans for 2015. We are very focused on that space."

— Alan Breznick, Cable/Video Practice Leader, Light Reading

MikeP688 11/11/2014 | 12:04:31 AM
Re: Strategy? I reflected upon this very fact earlier today.    What all need to also realize is that although the President's Party suffered a defeat, The President still matters--The incoming Majority Leader, Senator McConnell, underscored this.     I did nearly fall out of my chair in laughter as this story was published on my Daily Update earlier tonight....there is room for all if the the playing field is level--that's for certain.....
Phil_Britt 11/10/2014 | 7:25:33 PM
Re: Strategy? I don't know that the President's stance will carry that much weight following the results of the mid-term elections. 
MikeP688 11/10/2014 | 4:49:48 PM
Re: Strategy? People are entitled to change their mind..and since Corporations are people, we should give the benefit of the doubt.   But, the bigger question is the average individual out there and the fact that the providers are getting too big with choice suffering greatly.     Whether The Government can actually pull it off is another question--It will be steep climb especially as US Senator Cruz (who dreams of being President) called net neturality the "obamacare of the Interent".    
KBode 11/10/2014 | 4:17:56 PM
Re: Strategy? I like how Verizon brought this upon themselves by suing to overturn the original flimsy rules leading on Section 706, but now in its statement professes that moving forward under Section 706 is the best way forward -- as if they aren't responsible for the entire industry being in this predicament...
MikeP688 11/10/2014 | 11:28:05 AM
Re: Strategy? The President's new stance on Net Netuarlity also throw a new "curve ball" into the mix as well: 

http://www.marketwatch.com/story/cable-stocks-fall-as-obama-calls-on-fcc-to-protect-net-neutrality-2014-11-10?siteid=bigcharts&dist=bigcharts

What is laughable is how Verizon "admonished" the President.     

 
MikeP688 11/9/2014 | 11:54:24 AM
Re: Strategy? The only tragedy here is a loss of choice.   It seems as if we seem to be losing out on this ever so--and the price rises are prevalent throughout.    What is also ironic is how the content providers are touting their "pipeline" as epitomized by what Les Monvies noted on Bloomberg recently as he was talking about the content being available everywhere.  The distributors have a challenge on their hands--no question.   
KBode 11/9/2014 | 9:19:31 AM
Re: Strategy? I really think selling to somebody eventually is what this is all about. They've had a mass exodus of most of their execs the last few years, and as noted this plan to just keep hiking prices without offering better services doesn't seem like a long term winning strategy.
MikeP688 11/9/2014 | 1:32:50 AM
Re: Strategy? Mr. Dolan never ceases to amaze especiallly with how he drove the Knicks literally to the ground until he saw the light and hired Phil Jackson.    Maybe he'll talk Brian Roberts into buying the family out. :-)

 
danielcawrey 11/8/2014 | 12:35:11 PM
Re: Strategy? I'd sure be interested in figuring out how they plan to monetize wifi. Are they going to do it via advertising?

That seems to be the only way to do so, if they don't expect customers to pay for it. We'll see. Facebook and Google seem to do well in the ad market, so there certainly is opportunity there. 
KBode 11/7/2014 | 11:11:44 AM
Strategy? So really, what's the long-term strategy here? They don't care if customers looking for the best value leave, so they just hope to jack up the price on loyal customers forever? Do you think they're just in a holding pattern until they sell to Comcast in a few years? I don't see how not caring about your customers (they keep raising rates and haven't done much to mach Verizon speeds) is a sustainable long-term business model.
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