The economy, particularly the sluggish housing market, continues to hamper the ability of cable companies to add new TV subscribers, but that didn’t prevent Time Warner Cable and Cablevision from posting higher revenues and profits in the second quarter, the companies said Thursday.
“We very much like the free cash flow” at Rainbow, said Cablevision’s Seibert. “It fits in very well with the free cash flow at Cablevision overall.”
Cash flow was up 4% in the quarter at Rainbow to $91 million. Revenues were up 11% to $280 million.
When asked if he had any plans to re-brand some of Rainbow’s cable channels — similar to moves at Discovery with Discovery Kids becoming The Hub and Disney converting SoapNet to Disney Junior — the unit’s CEO Josh Sapan said he believed a redefinition of the channels was already underway. He said the channels now offer more original scripted programming, such as the new conspiracy thriller “Rubicon” on AMC that debuted with two million viewers last Sunday. Even the lineup at We TV, which Sapan said was primarily a movie channel, is now 65% original programming.
Time Warner Cable’s revenues grew 6% to $4.7 billion, and profits at the nation’s No. 2 cable outfit rose 8% to $342 million. Revenues at Long Island-based Cablevision were up 6% to $1.8 billion while operating profits rose 23% to $417 million.
But when it came to adding TV subscribers — the key measurement of success in cable before broadband and phone services were introduced — Time Warner Cable and Cablevision didn’t have much to brag about. At TWC, net additions dropped by 111,000 to 12.7 million. Cablevision’s video subscribers remained flat at 3 million. “We haven’t seen one bit of housing construction in our entire footprint,” said Cablevision COO Tom Rutledge. Housing starts typically drive new cable and satellite TV subscriptions.
Overall, though, Wall Street cheered the second quarter results for cable. “Time Warner Cable continues to operate at a very high level,” said Craig Moffett, an analyst with Sanford Bernstein. “The company enjoyed the same revenue tailwinds as peer Comcast and indeed posted even faster growth.” Revenues from broadband and phone grew 10% and 7% respectively, and advertising revenues jumped 24%.
At Cablevision, CEO Jim Dolan said 27% gains in advertising revenue, factoring in both the cable business and its Rainbow Media programming unit, helped boost the company in the quarter. Newsday, the Long Island newspaper owned by Cablevision, saw ad revenues decline and reported an overall revenue drop of 10% to $80 million.
Cablevision ended the quarter with $517 million on its books. “What will they do with the cash?” asked Bernstein’s Moffett. “A recent promise to repurchase $500 million in stock is a good start but leaves ample room for more. As the industry leader — first in phone, highest in digital (as in digital tier subscriptions) best in broadband — showing the way in cash return is the last remaining piece of the puzzle.”
On Cablevision’s programming front, executives were asked about the possibility of spinning off Rainbow.
Certainly, as shows like “Mad Men” and “Breaking Bad” gain even more popularity, the notion that the channel they call home could be part of a pure-play cable programming stock would certainly be attractive to a lot of investors. But Cablevision executives emphasized Thursday, as they have done in the past, that they have no intention of spinning off Rainbow, which includes AMC, We TV, IFC and Sundance.