Cable TV

Q3-2015: US cable industry video slide continues; ARPU rises

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BENGALURU: Like in the previous two quarters and even earlier, the cable industry in the US continues to bleed video subscribers, albeit slower than before, while internet and business services (BS) continue to be growth drivers in terms of subscription numbers and revenue in the quarter ended 30 September, 2015 (current quarter, Q3-2015). This report considers three players for Q3-2015 ? Comcast Cable Communications segment, Time Warner Cable and Charter Communications. Overall, YoY and QoQ subscription numbers or customer relationships of the three players in this report have increased, despite a fall in video customers.

Comcast Inc., Cable Communications segment is the largest player by far among the sample players in this report; Time Warner Cable, Inc., (TWC), is a little less than half the size of Comcast?s Cable communications segment in terms of revenue and Charter Communications (Charter) with revenues that are less than half again as TWC?s.

Despite the continued slide in video customer relationship, the combined sum of video subscribers in Q2-2015 of the three entities was about 3.72 crore or almost two thirds (61.4 per cent) of the 6.6 crore video subscribers through wire in the US as of 2013 numbers. The three players in this report are generally considered amongst the biggest players in the US cable television industry. All have three major revenue streams ? Video, Internet and Voice (VIVE).

Note: (a) 100,00,000 = 100 lakh = 10 million = 1 crore

(b) While denominations for US$ have been mentioned in millions or billions where applicable, denominations for numbers have been mentioned lakhs and crores.

(c) Residential customer relationship numbers have been used in this report wherever the breakup has been mentioned in SEC filings by the concerned entity. In the case Comcast Cable Communications segment, the breakup of subscription numbers in terms of Residential and Business Services has not been indicated.

(d) The results and the conclusions in this report may not necessarily reflect the true trends and nature of the cable communications industry in US.

Performance in Q3-2015

In general, six streams add to most of the three entities? revenue ? three products - Video, high speed Internet, Voice; Business Services (BS); Advertising; and Other. Collectively, the first three have been given the acronym VIVE by the author. Generally VIVE numbers, be they subscription or revenue indicate residential subscribers and revenue from these subscribers in this report. This report examines VIVE and touches briefly upon BS of some of the players later on. It must be noted that BS revenue exceeds revenue from Voice services, but since voice is one of the three limbs of triple play, it has been mentioned along with Video and Internet.

As mentioned above, in general, Internet has been driving growth, both in terms of revenue and subscription numbers. Contribution by BS is growing and is in low double digits in terms of percentage of overall revenue. Historically, over the previous two years, video revenues in Q3 of a year drop QoQ, before increasing in Q4 again. This has also happened in the current quarter Q3-2015. Due to the drop in video revenues, combined VIVE revenue has dropped QoQ in Q3-2015.

Overall combined subscription numbers in Q3-2015 increased 0.82 per cent (increased by 397,000) QoQ to 485.52 lakh and increased by 2.78 per cent (increased by 1,315,000) YoY from 472.37 lakh. QoQ growth was driven by a growth in internet and voice subscribers and partly offset by a decline, albeit at a much lower rate, of video subscribers.

In the current quarter combined Video Subscribers declined 0. 12 per cent QoQ to 371.57 lakh from 372 lakh and declined by 0.54 per cent YoY from 373.60 lakh. Combined high speed data subscribers in the current quarter increased 1.72 per cent QoQ to 403.54 lakh from 396.71 lakh and increased 6.88 per cent YoY from 377.55 lakh. Combined Voice subscribers in Q3-2015 increased 1.48 per cent QoQ to 199.80 lakh from 196.89 lakh and increased 8.30 per cent YoY from 184.48 lakh.

The combined overall revenue (OR) of the three players in Q3-2015 increased 0.13 per cent (increased by $27 million) QoQ to $20,112 million from $20,085 million and increased 5.62 per cent (increased by $1070 million) YoY from $19,042 million. Please refer to Fig A2 below.

Combined VIVE revenue in the current quarter declined 0.74 per cent (declined by $120 million) QoQ to $16,075 million from $16,195 million, but increased 4.2 per cent (increased by $648 million) YoY from $15,427 million. Video revenues of all the three players declined in this quarter as compared to the previous quarter. Internet revenues of all the three players increased, while Voice revenue of Comcast Cable Communications Segment and Charter increased. Voice revenue in the case of TWC declined QoQ in Q3-2015.

Average Revenue Per User (ARPU) continued to rise as is evident from Figure A3 below, with Comcast Cable Communications ARPU at $143.12 in Q3-2015 being about 13 per cent higher than TWC?s ARPU of $126.92 and about 26 per cent more than Charter Communications ARPU of $113.39. This huge discrepancy reflects the fact that Comcast has a much higher proportion of multi-play (triple play and double play) customers when compared to the other two players. Please refer to Figure A4 below. While Comcast Cable Communications segment (A4-1 below) had about 31 per cent of single play customers, and 69 per cent multi-play (33 per cent of double play and 36 per cent triple play) customers in Q3-2015, in the case of the other two players (A4-2 and A4-3 below), single play customers totalled about 39 per cent and multi-play customers around 61 per cent.

Business Services Revenue

Combined Business Services Revenue (BSR) of the three entities increased 3.93 per cent QoQ to $2,330 million (11.59 per cent of combined Overall Revenue or combined OR) from $2,242 million (11.16 per cent of combined OR) and increased 17.20 per cent YoY from $1,988 million (10.44 per cent of combined OR). As has been mentioned, contribution by BSR to OR has been increasing ? Combined BSR share of combined OR in Q2-14 was 9.99 per cent, in Q3-2015 it was 11.59 per cent.

Please refer to figure B below. BSR has been increasing in absolute dollars as well as by way of contribution to OR. Amongst the three players in this report, BSR contribution has been the highest in terms of percentage of overall revenues in the case of TWC over the past six consecutive quarters considered in this report. Even in the case of Comcast Cable Communications segment, which had the highest BSR in terms of absolute dollars, BSR?s contribution has entered into double digits in terms of percentage of OR in the current quarter. While Comcast Cable Communications Segment break-up of residential and BSR subscription numbers is not available, Figure B1 below clearly indicates that TWC and Charter BSR subscription numbers have been increasing over time. 

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