Cable comes up a winner even while losing, thanks to broadband

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Believe it or not, the U.S. economy is still pretty shaky with states battling with their workers and the federal government wrangling over budget issues.

What makes it so difficult to believe is the sparkling reports popping up everywhere about the cable industry. Cable is "attractive" and a recommended buy for investors, according to Goldman Sachs. The corner has been turned and prospects are again looking good, Sanford Bernstein analyst Craig Moffett told The Hollywood Reporter. Comcast is entering "an exciting new beginning," said Chairman-CEO Brian Roberts.

It's enough to make an optimist blush. And it's a little difficult for a cynic to swallow when these same glowing reports are attached to an industry that continues to lose subscribers to the competition and, despite naysaying from cable execs, a plethora of over-the-top content sources.

According to fourth quarter earnings results Comcast alone dropped another 135,000 basic-only subscribers--and that was good news because it was supposed to be 199,000 according to some estimates. Time Warner watched 105,000 subs walk off; Charter said adios to 63,000 and Cablevision, justifiably or not, came up 35,000 video subs lighter in its subscriber rolls.

If we were talking about cars made and sold stock brokers would be jumping out of high rise windows. Instead, the Leichtman Research Group issued a breakdown that showed cable is actually gaining subscribers to the tune of 2.3 million bodies in 2010.

The difference is, those added subscribers signed on for high-speed broadband and telephony services (which in the cable business are joined at the hip), not traditional cable TV. It might have been an accident at first, but the latest cable executive comments indicate it's not accidental now: Cable is reaching out to people who actually may not watch TV, may find cable television odious, or may watch DirecTV, Dish Network, FiOS or U-Verse but can still find cable attractive.

Searching for lost subscribers

Charter President-CEO Mike Lovett didn't exactly dismiss the lost video subscribers during his fourth quarter call. Mike Lovett, CharterHe said they'd maybe return to the fold as Charter rolled out a deal with DVR maker TiVo or, on a parallel track, as the MSO became more involved with its next-generation television concept that integrates "traditional television and online content" via a hybrid platform of traditional cable and next-generation IP.

That service depends, of course, on Charter's broadband platform, and Lovett wasn't shy about stating the advantages of that platform.

"We'll continue to leverage our Internet speed advantage to grow customer relationships and increase the value of our bundled services," Lovett said. "With the significant increase in the number of devices, applications and cloud-based services that rely on robust Internet connectivity, higher speeds and reliability are important to every customer. Our speed advantage gives us a competitive edge."

At Comcast, Roberts has been ebullient about the Xfinity offering and how it works with the iPad. While Comcast recently added Android capabilities to its IP mix, Roberts has pushed the iPad like a salesman working for a commission.

During his fourth quarter earnings call, Roberts pointed to the "technological shift with mobile devices (even though Comcast doesn't have a mobile play), with WiFi and with tablets and pricing. If you had to look out the next couple years, it's not at all inconceivable that many, many providers of these devices attached to the Internet through a WiFi connection in your home are going to give you an array of new services that you just don't have historically."

He also gently admonished those on the call "if you haven't downloaded our Xfinity app and you haven't hit the 'play now' button" to do so.

Hooking up with the connected home

Connected devices are key elements for Time Warner Cable and Cablevision--perhaps especially for Cablevision, which is depending on much of its future subscriber growth and retention to come from an Internet-based play: a remote-server DVR (RS-DVR).

"The service allows our customers to record up to four shows at once and watch any show on any TV in the house at the same time," Cablevision COO Tom Rutledge enthused while reporting higher revenues and lower subs.

On top of that, Cablevision is launching a "PC-to-TV media relay (because) as Internet usage continues to grow, we're providing our customers with the ability to view what is on or available to their PC on their television without the need for a new set-top box or a new TV with built-in IP connectivity," he said.

Glenn Britt, Time Warner CableThose subscribers who buy such connected consumer electronics devices will be right at home at Time Warner, where Chairman-CEO Glenn Britt sees them breaking the bondage of the set-top box.

"For years our video user interfaces have been constrained by the limited capabilities of set-top boxes," Britt said. "By taking advantage of more powerful consumer electronics devices, we can offer a much more compelling navigation experience that offers more functionality and is more aesthetically pleasing than anything we've done in the past."

Functionality? Aesthetically pleasing? From a cable company? Probably not. From a broadband company, that's another matter.

That's why Bruce Leichtman, the president and principal analyst of the Leichtman Research Group pointed out, "Despite an increasingly high level of broadband penetration, the top broadband providers still added 83 percent as many subscribers in 2010 as in 2009."

The reason's easy. Broadband is where the subscribers are, so broadband is where the cable operators are going.

"We are focused on our best customers and expanding that experience," said Roberts.

For more:
- see this Goldman Sachs report
- the Hollywood Reporter has this story
- listen to Comcast's Q4 earnings report webcast
- and Charter's Q4 webcast
- Cablevision's Tom Rutledge can be heard here

Related articles:
LRG Study: Cable not hurting when it comes to broadband subscribers
Comcast's Roberts: Size matters in an up and down economy

Check out the cable industry's fourth quarter earnings news