The death of Big Cable has been greatly exaggerated.Overall, the industry has been losing pay-television subscribers, and that trend has been accelerating.
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In 2015, cable and satellite providers lost 385,000 pay-TV customers, according to data compiled by Leichtman Research Group (LRG). Through three quarters of 2016, the industry has lost 910,000 subscribers, and the number will likely end the year over a million, based on the companies that have reported Q4 numbers so far.
That seems bleak, but the losses in cable and satellite have been more than made up for in broadband additions. In 2015, the industry added 3.1 million broadband customers, according to LRG, and year to date through three quarters, over 1.8 million more people have subscribed to internet services.
Going forward, these trends will likely continue. The three companies below have all successfully navigated the changing cable industry and look set to continue doing well, even as the market changes.
Some people are cutting the cord, but these cable companies are finding other ways to make money. Image source: Getty Images.
Comcast owns a lot of everything
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Much more than a cable/internet company, Comcast (NASDAQ: CMCSA) also owns NBC, various cable channels, a thriving movie studio, and the Universal Studios theme parks. Being that diverse allows the company to build its own success. For example, a successful film franchise like Fast & the Furious not only has earned billions at the box office, it's also a theme-park ride, video game, and perhaps, eventually, a TV property.
As a cable company, however, Comcast has done as well as any of its rivals. The company even pulled off the remarkable feat of adding 161,000 pay-TV customers in 2016, a year when most of its rivals had at least small losses. The company also added nearly 1.4 million broadband subscribers, while revenue for Cable Communications group -- which houses cable, broadband, and voice -- grew 6.6%, to $50 billion year over year.
Comcast has become such a well-diversified company that even in a year when its movie division saw revenue drop 12.7%, mostly due to the general cycle of releases for its biggest properties, the company still had positive revenue growth. For the full year, the company saw consolidated revenue increase 7.9%, to $80.4 billion, compared to 2015.
Charter has proven bigger is better
Until buying the former Time Warner Cable, Charter Communicaitons (NASDAQ: CHTR) was just another midsize player. After the purchase, the company became one of the industry's big three along with Comcast andAT&T(NYSE: T).
As cable and broadband gets bigger, it means saving money. Once you have billing, customer service, and other departments in place, those groups can lower their cost-per customer as a company adds subscribers. Since the Charter deal for Time Warner (and Bright House Media) only closed in May, most of those savings are yet to come, but the numbers should be substantial.
Expenses actually increased in 2016 by 4.8%, partly due to transition costs, and in part because of higher programming costs. Going forward, the transition costs obviously will end, and having substantially more subscribers should give Charter added leverage when it comes to negotiating what it pays for various channels.
Even without those future savings, which may take years to be fully realized, Charter saw revenue increase 7%, to $40 billion, on a pro forma basis. In addition, in Q4, its second full quarter owning the new properties, the company saw only a modest loss of 51,000 pay-television customers, while it added 357,000 internet subscribers.
AT&T has made DirecTV bigger
AT&T has proven that it's all about the bundle. That's why one of its early moves when it bought DirecTV in July 2015 was to offer customers who added the wireless service to a satellite television unlimited data -- something it was not offering new customers at the time. In addition, buying DirecTV gave AT&T some of those same synergy savings that Charter should eventually achieve, with the company noting in its Q4 earnings release that it reached $1.5 billion in annual cost-synergy savings from the deal.
The only company to own a wireless carrier, a cable company, a satellite company, and also provide broadband, AT&T has the ability to leverage its subscribers into increasing their relationships with the brand. It can also use bundled savings to make it harder for customers to drop one service because it raises the price of others they want to keep.
AT&T also had an excellent 2016, with consolidated revenue growing from $146.8 billion the year before to $163.8 billion, an 11.6% increase. The company credits that to "a full year of results from DIRECTV and gains in IP services and video." DirecTV added roughly 1.2 million customers in 2016, while the company's U-Verse brand lost slightly more than that. AT&T was also essentially flat in broadband -- where DirecTV cannot directly help -- but added 9.5 million wireless customers in 2016 (6.2 million in the U.S. and 3.3 million in Mexico).
While AT&T faces increased competition in wireless, the company has been very resilient. In pay television, it now has a cable brand, a satellite brand, and the DirecTV Now streaming service. That essentially gives it something for everyone, even cord-cutters, as a way to keep them tethered to the company.
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