Reduced costs at Spanish pay TV giant Sogecable and its broadcaster subsid Cuatro spurred third-quarter net profits, helping Sogecable achieve the best September results in recent years.
Sogecable swung to quarterly earnings of E14.3 million ($20.2 million) from a loss of $14.4 million a year earlier, pushing profits for the first nine months to $71.2 million.
Sales hit all-time records of $509.5 million for the quarter and $1.85 billion for the year through September.
Results were slightly better than analysts’ expectations, largely because of cost containment.
Programming costs in the quarter plunged 19% to $251.2 million. Part of that drop can be explained by one-off expenses associated with airing World Cup soccer on Cuatro and Digital Plus last year.
In addition, however, “Digital Plus has begun to benefit from new contractual conditions for the acquisition of movie content,” according to a Sogecable results report.
Sogecable declined to talk about which studios deals have come up for renewal at the Spanish TV giant. But the market trend is clear.
Sogecable was forced to pay high sums when it originally clinched its exclusive premium pay TV deals with the Hollywood majors in 1997, in the face of bitter competition from government-backed rival Via Digital.
The cost of those deals is still weighty. Sogecable’s first nine-month programming costs stood at $1 billion. Some $350 million-$400 million can be attributed to movie and niche channel costs, said one analyst.
But, as Hollywood deals come up for renewal, Sogecable is aided by three factors: It absorbed rival Via Digital in 2003, so it isn’t being forced into costly price wars; the value of movies has declined to pay TV operators; and the dollar is weak, meaning dollar deals cost less in euros.
Two shadows still hang over Sogecable, however: the question of how to kickstart substantial subscriber growth at Sogecable satcaster Digital Plus and the future of Spanish soccer league rights after the 2008-09 season. Sogecable’s client base grew by just 40,000 over the past 12 months.
Media conglom Mediapro has rights to 12 Spanish soccer clubs beginning next year and is threatening to bypass Sogecable, airing games on digital terrestrial television.