Time Warner chairman Glenn Britt said pricey long-term pacts like ones with the Los Angeles Dodgers and Lakers may be the only way to keep the out-of-control costs of sports programming in check for beleaguered cablers.
A 25-year agreement with the Dodgers, announced Monday and said to be worth $7 billion-$8 billion, follows a 20-year pact with the Los Angeles Lakers for an estimated $3.6 billion. “We continue to negotiate the best deals we can get. In the case of sports, we have taken steps to manage and stabilize costs,” Britt said Thursday during a conference call to discuss quarterly earnings.
The Lakers and Dodgers deals are “not cheap,” he acknowledged, but better than the alternatives.
Time Warner Cable stock plunged 10% in midday trading after its 2013 profit forecast, released with the earnings, fell short of Wall Street expectations. The reason the company cited: higher programming costs.
The company said net profit for the fourth quarter of 2012 fell 9% to $513 million.
Revenue rose 10% to $5.5 billion due in large part to an 11% bump in sales of high-speed Internet service.
That was offset by a 3% dip in video revenue, a trend that’s dogged most cablers faced with fierce competition and expanding consumer options.
The second largest cable provider after Comcast ended the year with about 12 million subscribers. It lost 129,000 video subs and gained 75,000 high-speed data customers.
Britt said that over the past four years, programming costs have risen 32% — more than three times the rate of inflation. The company has raised its rates only half as fast as its costs went up. “It’s clear that this is not in the best interest of the consumer, and clear that it can’t continue forever,” he said. What is less clear, he added, is how things will change.
Average monthly video programming costs per video sub rose 5.1% last quarter year-over-year to $31.28, driven by contractual rate increases and the carriage of new networks.