Bad Day For Charter

Quite a sell-off today for CHTR:


Subscriber Losses Drive Charter Stock to 52-Week Low

Has Charter (CHTR) Reached The End Of The Road?

"The number that scares shareholder is the $453 million in interest expense. That is an awful lot for a company that reported only $210 million in cash flow.

Charter is in real trouble now. Billionaire Paul Allen controls the company. And it is going to cost him some real dough to get out of this."

In fact all cable companies are frowned upon by professional investors right now - Why Wall Street Hates Comcast?

Update from Neil Smit, CEO of Charter, in an email to employees:

This morning we issued our third quarter financial and operating results. I am very pleased to have reported our 4th consecutive quarter of double-digit revenue and adjusted EBITDA growth. We are demonstrating consistency in our financial results.

Although our quarterly revenue generating units (RGUs) decelerated from the first half of the year, we have already taken steps to regain RGU growth momentum, and we saw a rebound in RGU trends as we moved through the quarter. Nevertheless, investors were disappointed in third quarter operating performance of Charter and many of our industry peers.

As a result, Charter’s stock is trading lower today. In fact, over the past few months, along with the overall market, most companies in our industry, have traded lower as increasing competitive advertising and a softer housing market impacted results.

We must remain focused on enhancing the customer experience and growing our company, which I believe are the best ways to improve the stock price. We must not let volatility in the stock market distract us from achieving these goals.

While there is much work yet to be done, we have a lot to be proud of, and I appreciate your hard work and dedication.

Neil

Macs Are Cheaper And Better -Duh

Once and for all, proof that Macs are cheaper than PCs
Let's put to rest the myth that an Apple computer will set you back more than a Windows PC. In fact, it'll cost you less.

Sports On Cable Television

Disclaimer - I do not want football programming on basic cable.

Football on TV is huge. But DirecTV is evil. DirecTV is currently controlled by Rupert Murdoch's News Corporation. Not only does DirecTV call customers on the Do-Not-Call list to ask if they want to hear a sales pitch anyway, but they also carry the Big Ten Network.

The Big Ten Network was launched by the Big Ten Conference in conjunction with Fox Sports which is owned by News Corporation. The Big Ten Conference wants to be on basic cable, at a cost of $1.10 per subscriber. Most cable companies want to place the channel on a sports tier so that only sports fans who want the channel pay for the channel. For comparison, a cable company can carry MTV, the Comedy Channel, and the History Channel for the same price to customers as The Big Ten Network.

This is the complete opposite of how the Fox News channel was launched in 1996. At that time News Corp offered cable operators $10 per subscriber to carry the channel. And 10 year carriage agreements were signed at only $0.13 per subscriber. Fox executives figured that when those 10 years were up they would have a successful channel and therefore demand higher rates from carriers whose customers were now accustomed to having Fox News on basic cable. This "crack cocaine" strategy worked.

Because of the outrageous fees the Big Ten Network is demanding I am led to believe that News Corporation never intended the channel to be carried by cable companies. But if a few companies gave in that is even better because of the extra and unexpected revenue and this would make the cable companies holding off on the channel appear non-responsive. No, the Big Ten Network was launched as a vehicle to drive customers to DirecTV in order to inflate subscriber counts prior to News Corporation selling their stake in DirecTV to Liberty Media.

NFL Network has insane pricing too. The price to a cable company to carry the NFL Network's eight football games is the same as College Sports TV + ESPN2 + ESPNU (and the NFL Network is asking some providers for a 250% raise.) While the NFL is popular (22.5% of the people watching TV saw the end of the Patriots vs Colts game last weekend), why should 75% of people be saddled with fees that subsidize the TV habits of 1/4 of the audience? Today the NFL Network came out to ask cable customers to switch to another provider if theirs doesn't carry the channel for free. This is probably just another ploy to drive subscribers to DirecTV, which has been a long time 17 billion dollar per year whore for the NFL. For example they get 2 million suckers to pay $269 for the NFL "Sunday Ticket" each year. The NFL has a long time love for all things Rupert Murdoch. It all started back in 1993 when he grossly overpaid for rights to the NFC football games. This left 12 big-market CBS stations with a huge hole in their Sunday programming - so they jumped ship to Fox. And so began the meteoric rise of the NFL's popularity and the rise of the Fox channel. Murdoch and Fox have been pimping for the NFL ever since and it appears now that the NFL is returning the favor.

The NHL is being much more reasonable. For example, Charter Communications is launching the NHL Network this month - but in the Digital Sports Tier. Not basic cable.

What is amazing is that people (including football fans) complain about rising cable rates - but these are tied directly to increased programming costs (who do you think really pays athletes multimillion dollar per year salaries) and when some cable companies attempt to keep costs down these people complain. And it wouldn't surprise me if the same people clamoring for these football networks also want a'la carte television (paying only for the channels they watch). So the cable companies try to offer an a'la carte tier and get hammered for it. It is disingenuous at best.

Bibliography:
2004 Annual Report - Cable TV Economics
Wikipedia-Big Ten Network
Putting Fans First (funded by Comcast)
NFL Network
Murdoch's Biggest Score

Verizon Gets Better, Cable Companies Get Badder

Verizon Targets 150 HD Channels in 2008: Telco Also Promises ‘Major Expansion’ of Sports and Multicultural Programming

Verizon Leads the Great 100-Mbit/s Bandwidth Race
"It [Verizon] is currently testing 100-Mbit/s service in employees' homes."

Verizon Previews FiOS Future
"In the demo, Verizon showed off the multi-player aspect of the service with a round of golf between two employees, one playing from a set-top box and the other from a mobile phone. Part of the plan is to let users switch from playing on one device to another. "

In Search of a Google-Verizon Deal
"Verizon Wireless and Google may be nearing an agreement that would place the Internet search engine in a prominent spot on the cellular operator's phones, but speculation that Verizon is set to introduce a new breed of phones developed by Google is overblown, say people familiar with the matter. "

In my opinion this paves the way for the Google phone to launch on the Verizon network, but really lays the pathway for Google television advertisements on FiOS TV. Probably if advertisements are successful on the mobile network they'll launch across FiOS as part of the "FiOS Future" in the link above.
Google Partners with Nielsen for TV Ads

While Verizon gets cozy with Google the cable companies that joined Sprint in order to offer the "quad play" (TV, Internet, land line, wireless phone) get pushed to the side - Sprint Freezes Pivot Phone Rollout With Cable Operators

This news is not good for cable companies. And it is about to get worse like it just did for Comcast. To conserve bandwidth cable companies are relying on deep packet inspection (Communications Technology - Deep Packet Inspection) from companies like Sandvine to limit the amount of bandwidth used by P2P traffic. This is not the way to win customers and is not how the Interent is supposed to work (Consumer Groups Upset With Comcast). But all the cable companies have to do it because they have very limited upstream bandwidth for cable modems (this is because of the structure of the cable network, there's a big funnel back to the cable headend and signals from the cable modems get mixed in with radio "static" and it is hard to pick out the signal from the noise coming back from the field).

The cable companies have options to get bandwidth back but it is likely that they'll never catch up with Verizon unless they take fiber into the home with a micronode (What does cable's future with fiber hold?)

P.S. The AT&T U-verse product which is sold as similar to FiOS is crap. They deploy fiber to the field but then use a copper wire (like DSL) into the home. So it is just a copy of what the cable companies already do. This is not a step forward.