jstratt

Cable TV's Decline: Two Views

What I see on one hand is results that so far continue to grow for cable even in a poor economy. The cable industry is an industry people love to hate and writing positive articles on cable has not been fashionable for many years. Still year in and year out they continue to grow top line revenue.

As an example in 2000 cable companies were offering analog video and earning $30 monthly from these base customers. Then came High Speed Internet and Digital cable and the average customer was paying $60 a month. Today telephone has been added and a larger customer base exists of customers paying $110 per month.

The result is that cable companies are efficient at selling programming for content providers. To suggest that content providers are going to give away their product to undercut the huge revenue they get from cable companies seems unreasonable. On top of that their customers typically have to be cable customers first.

Charter Communications, Inc. Q1 2008 Earnings Call Transcript

I thought there was a lot to like about the Charter earnings for the 1st quarter. Significant gains of customers in Digital Cable, High Speed Internet and in Telephone was great. The Average Revenue per user increased to over $100 for the first time. Finally a big new area took off with huge gains. The Video on demand revenue grew rapidly which I think holds much long term promise.

I dont expect Charter to make profits as long as it is financed by about 97% debt. However Charter appears to be growing more valuable every day. I think the market will recognize the proper value of the business in the future.

The proper value for a cable company with 5.6 Million customers and growing consistently with over $100 ARPU may be in excess of $4,000 a customer.

Several years ago it was worth around $5000 a customer and it only had one Television product line.