Sunday 22 April 2018

How internet's getting bigger than TV for the cable guys

Brian Roberts, president and CEO of Comcast Corporation, the largest cable TV company in the United States
Brian Roberts, president and CEO of Comcast Corporation, the largest cable TV company in the United States

Kelly Gilblom

IT'S A sign of the times: the largest cable company in the US may soon have more internet than TV subscribers.

Comcast's video users increased by 6,000 in the last quarter, for a total 22.4 million. Meanwhile broadband subscribers surged by 375,000 to almost 22 million.

The shrinking gap underscores the sea change in the way consumers are watching televised entertainment in the country - more and more online on services like Netflix and Amazon, and less and less on TV.

The result: pay-TV providers like Philadelphia-based Comcast are competing hard to attract more broadband users.

At Time Warner Cable, which Comcast agreed to buy a year ago, broadband subscribers already outnumber cable TV customers.

Unlike Comcast, which still managed to add video users last quarter, Time Warner Cable lost TV subscribers.

"The cable companies are saying: 'Even if everybody drops video and goes to Netflix, where are they going to get broadband? They've got to go back to me,'" said Paul Sweeney, an analyst at Bloomberg Intelligence.

"Broadband is what's going to drive our business."

Comcast is mostly losing video customers who only subscribe to cable, as opposed to "Triple Play" customers who buy phone, data and cable in a bundled package.

Bundle subscribers tend to switch providers less and generate more revenue, Mr Sweeney said.

Regulators have taken a tougher stance on how Comcast and other broadband providers manage their networks, raising questions about Comcast's ability to complete a transaction that merges the two biggest cable companies in the US.

Although most signs pointed to an approval when Comcast announced its proposed $45.2bn takeover of Time Warner Cable a year ago, investors have since become increasingly sceptical.

Addressing the concerns, Comcast chief executive officer Brian Roberts said he still expects the merger to close early this year.

"We continue to believe this is an approvable transaction," he said on Tuesday on a fourth-quarter earnings conference call.

Pay-TV subscriptions have been under threat for years. Viewers age 18-to-34, the most coveted by marketers, have been watching less live TV since 2012, with viewership declining about 4pc a year, according to Nielsen data gathered by Horizon Media.

While the internet has become a growth engine for Comcast, cable remains the biggest unit of the two, by far. Comcast's cable generated $20.8bn in revenue last year, compared to $11.3bn for high-speed Internet. It's similar at Time Warner Cable, where video revenue of $10bn still surpassed the broadband division, with $6.4bn. (Bloomberg)

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