Satellite takes bite

Cablevision's gains drained by Voom bow

A correction was made to this article on May 11, 2004.

NEW YORK — A solid quarter of subscriber gains didn’t ease investors’ collective cable malaise Monday as Cablevision reported healthy topline gains that were blotted out by startup satellite losses.

Cablevision posted digital subscriber gains in all video and telecommunications categories, as total revenues grew 19% over last year to $1.19 billion for the first three months of 2004.

Still, company’s risky plunge into the competitive DBS fray with the launch of the high-def Voom satellite service last fall took a big bite out of the bottom line in the last quarter and kept investor jitters high. Cablevision shares fell 2.9% Monday in a down market to close at $20.95.

Not that Voom results would have made a huge difference on a panicky Wall Street trading day, where interest rate and geopolitical fears sent all stocks south.

Long Island, N.Y.-based company reported operating income before depreciation and amortization down 8% to $268 million. Its operating loss of $9.6 million reversed the previous year’s operating income of $31.6 million.

Company reported a net loss of $120 million for the quarter, which was nevertheless an improvement from a net loss of $151 million in last year’s corresponding period, which was restated to adjust for amounts improperly recognized in past years.

In line with strong gains among its cable sector peers, Cablevision added 150,00 new digital subs in the quarter — offsetting a loss of 820 basic subs — along with 72,000 high-speed customers and 42,000 telephone customers. Company also said it now has around 66,000 high-definition subs, a significant increase on the 34,500 it tallied as of December 2003. Video-on-demand income is also rising, with VOD/SVOD revenue per sub up 46% to $6.13 per digital customer per month compared to only $4.21 last year.

At the Rainbow Media programming unit, cable networks AMC, the Independent Film Channel, Women’s Entertainment and Consolidated Regional Sports grew their topline nearly 60% for the quarter to $222.4 million, thanks to big gains in advertising revenue and affiliate fees at AMC and WE.

Division’s operating income jumped a healthy 47% to $65.9 million. The unit also benefited by the fact that income from the Chicago and Bay Area Fox Sports Nets are now fully consolidated in Cablevision financials.

Not surprisingly, however, Cablevision’s bold but still untested DBS startup Voom was the primary culprit for the parent company’s 8% decline in operating income.

Rainbow DBS lost $45 million in the quarter and now has around 8,000 “activated customers” to show for its effort. The operating deficit was due mostly to content development costs for marketing and sub acquisition spending for the platform’s 35 high-definition channels. Voom generated revenues of just $1 million, mostly on equipment sales, and posted an operating loss of $54.8 million.

Platform recently agreed to a distribution partnership that will enable Voom to get into higher-end retail venues. Company also recently cut the price of equipment from $725 to $400.

Madison Square Garden businesses also took a quarterly toll, with live-event revenue declines plus higher expenses and sports salaries feeding an operating loss of $20 million.

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