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CableOne Shrugs Off Video Losses

After losing 15% of its video subs in the last 12 months, US MSO says that's no big deal because its expenses are down and its profits are up.

Alan Breznick

November 4, 2014

3 Min Read
CableOne Shrugs Off Video Losses

In a telling sign that the pay-TV business ain't what it used to be for cable operators, CableOne posted another big loss in video subscribers and dismissed the loss as a mere nuisance at most.

Cable One Inc. , the tenth-largest MSO in the US with nearly 500,000 video customers spread across smaller markets in 19 states, reported Tuesday that it shed about 14,100 TV subscribers in the third quarter. While this figure represents a slight improvement over the nearly 14,700 video subs it lost in the same period a year ago and a much bigger improvement over the 34,000 subs lost in the second quarter, it still dropped the company's sub total to a new low of 476,000.

Even more notably, it meant that CableOne has now lost about 85,000 video customers, or 15% of its subscriber base, in just the past 12 months.

But that doesn't seem to bother CableOne executives much. In fact, unlike most other larger cable operators, the MSO practically played up the subscriber loss in its earnings release yesterday, boasting that its bottom line is actually improving with fewer video customers even though its overall revenue is declining. For instance, the company reported that its operating expenses fell 4% on a year-over-year basis to $155.6 million while its operating income edged up 1% to $40.1 million.

"The cable division continues its focus on higher-margin businesses, namely high-speed data and business sales," CableOne's owner, Graham Holdings Co., said in the earnings release. "Due to rapidly rising programing costs and shrinking margins, video sales now have less value and emphasis (subscribers down 15% over the third quarter of last year) and programming costs have been reduced significantly."

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

Of course, some of this could just be company bravado. For much of the year, CableOne has been battling with Viacom Inc. (NYSE: VIA) over programming contract renewals. In April, the MSO made a splash when it dropped Viacom's 15-network bundle -- including MTV, Nickelodeon and Comedy Central -- rather than pay the higher carriage fees that Viacom demanded. Justifying its decision, CableOne said then that its customers simply didn't value the Viacom networks that highly.

But CableOne's downplaying of the traditional pay-TV business seems to be more than just lip service. As we've previously reported, the MSO is one of a number of small and midsized cable operators that have been paring back their linear video offerings for years because of rising programming costs and growing consumer adoption of online video. Instead, it has been focusing on building up its broadband business, which now boasts more customers than its video unit for the first time. (See Is Dumb Pipe the Smart Move?)

In one of the latest signs of this shift towards broadband and online video, CableOne recently struck a deal with Netflix Inc. (Nasdaq: NFLX) to integrate the Internet video giant's programming into its video offerings. With the July deal, CableOne became the third top 10 US MSO to agree terms with Netflix since the spring, following in the footsteps of Suddenlink Communications and Mediacom Communications Corp. .

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

About the Author(s)

Alan Breznick

Cable/Video Practice Leader, Light Reading

Alan Breznick is a business editor and research analyst who has tracked the cable, broadband and video markets like an over-bred bloodhound for more than 20 years.

As a senior analyst at Light Reading's research arm, Heavy Reading, for six years, Alan authored numerous reports, columns, white papers and case studies, moderated dozens of webinars, and organized and hosted more than 15 -- count 'em --regional conferences on cable, broadband and IPTV technology topics. And all this while maintaining a summer job as an ostrich wrangler.

Before that, he was the founding editor of Light Reading Cable, transforming a monthly newsletter into a daily website. Prior to joining Light Reading, Alan was a broadband analyst for Kinetic Strategies and a contributing analyst for One Touch Intelligence.

He is based in the Toronto area, though is New York born and bred. Just ask, and he will take you on a power-walking tour of Manhattan, pointing out the tourist hotspots and the places that make up his personal timeline: The bench where he smoked his first pipe; the alley where he won his first fist fight. That kind of thing.

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