Time Warner Cable’s Troubles Selling SportsNet LA Hurt Q3 Earnings, But Attracted LA Subs – Update
UPDATE, 6:44 AM:
Time Warner Cable still wants other distributors to pick up its SportsNet LA, which carries Dodgers baseball. But their refusal to do so had at least one benefit for TWC which, of course, does have the channel. LA “had the best year-over-year (subscription) performance in Q3″ compared to other TWC markets, CEO Rob Marcus told analysts in a call to discuss earnings. SportsNet LA “got meaningful viewership during the season both in terms of percentage of customers watching and the amount of time that they watch the network. So I don’t think our view of the value of that network is in any way diminished as a result of the affiliate sales experience we’ve had in season one.”
The CEO says he isn’t especially concerned about the growing initiatives to offer video online, including HBO and CBS’ recently announced so-called over-the-top services. As a major seller of broadband, “we’re kind of intrigued… We’ve always said that over-the-top video was the killer app for high-speed data.” He doesn’t know whether it will soon prompt programmers to break up their channel bundles, so pay TV distributors can offer channels à la carte. Still, “over time this is one unified market so it’s hard to imagine that things stay status quo.”
Meanwhile, TWC has “never thrown in the towel on the video business and believe we have an opportunity to grow that as well.” If he’s wrong, and online services cannibalize cable TV subscriptions, then TWC could try to recoup its losses by promoting usage based pricing for broadband. But Marcus says that isn’t in the cards now. He still sees usage-based fees as “an option for customers who want to pay less because they use less.”
PREVIOUS, 5:06 AM: Lucky for Time Warner Cable, most investors just want to know when Comcast will come in to fix it up. If they weren’t looking forward to the $45 billion acquisition, then the Q3 report at the No. 2 cable operator would really sting. TWC’s net income of $499 million was down 6.2% from the same quarter last year on revenues of $5.71 billion, +3.6%. Analysts thought that revenues would come in slightly higher, at $5.75 billion. And earnings-per-share at $1.86 missed the Street’s forecast for $1.91.
CEO Rob Marcus appears to recognize his company’s woes based on his terse and vague comment in the earnings report. “We are executing well against our plan, with solid financial performance and strong subscriber momentum,” he says. “We continue to expect the Comcast merger to close in early 2015.”
The biggest problems are in the video business where costs are rising, but subs fell. Outlays for programming and content increased by 9.6% due in part to TWC’s SportsNet LA, the regional network that carries the Los Angeles Dodgers – and that most other pay TV providers serving the region refused to pick up. With a number of video subscribers down 184,000 since June to 10.83 million, the average monthly programming cost per residential video subscriber was up 11.1% vs. last year to $38.96.
TWC benefited from a gain of 92,000 broadband subscriptions since June, for a total of 11.4 million. But it also invested heavily in its all-digital TWC Maxx initiative, which offers Internet speeds as fast as 300 Mbps and is now complete in NYC and LA. But that also meant that capital expenses rose 43% from last year to $1.1 billion.
The company shelled out $48 million in the quarter for merger-related costs.
Related stories
Is Wall Street Starting To Doubt That Comcast-Time Warner Cable Deal Will Close?
UPDATE: Comcast Says HBO And CBS Online Plans Won't Upset TV Ecosystem: Live Blog
Cable Programmers, Citing Privacy Concerns, Hold Up FCC's Review Of Comcast And DirecTV Deals
Get more from Deadline.com: Follow us on Twitter, Facebook, Newsletter
