DirecTV, Cablevision Systems Corp. and Time Warner Cable Inc. reported second-quarter sales that beat analysts’ estimates, signaling consumers are continuing to spend on pay-TV programming as the economic recovery sputters.
Each company added subscribers in the period ended in June and customers spent more on premium services such as high- definition set-top boxes and digital-video recorders.
Consumers may be putting more value on their time at home and curbing restaurant and cinema visits, benefiting the pay-TV providers, said Tom Eagan, an analyst at Collins Stewart LLC in New York. More Americans than projected filed applications for unemployment insurance last week, indicating firings remain elevated as the U.S. economic growth moderates.
“Cable and satellite has been relatively recession proof,” Eagan said. “Household spending is holding up because people in general see cable and satellite-TV being a relatively good deal versus other forms of entertainment.”
Time Warner Cable, the second-largest U.S. cable-television company, boosted sales 5.8 percent to $4.73 billion, beating the $4.68 billion analysts projected. DirecTV’s sales rose 12 percent to $5.85 billion, exceeding analysts’ $5.73 billion estimate. Cablevision’s sales rose 5.8 percent to $1.8 billion, compared with the $1.77 billion average projection.
DirecTV added $1, or 2.6 percent, to $38.90 at 2:23 p.m. New York time in Nasdaq Stock Market trading. Cablevision fell 2 cents to $27.52 on the New York Stock Exchange, and Time Warner Cable dropped 21 cents to $58.81. Contrary to analysts’ predictions, Time Warner Cable didn’t announce a stock buyback.
Cablevision, which competes against Verizon Communications Inc. for New York area TV, phone and Web subscribers, won 75,900 new customers last quarter, led by high-speed Internet users. Customers subscribing to more products helped the Bethpage, New York-based company boost the average monthly revenue per video customer 6.8 percent to $149.12.
“We’re holding up quite well and managing to continue to win back customers from our competitors,” Cablevision Chief Operating Officer Tom Rutledge said on a conference call today. He estimates that 40 percent of Cablevision’s customers who have left to try Verizon’s FiOS product return.
DirecTV’s average revenue per user gained 5.7 percent to $87.90, as the company equipped U.S. customers with advanced and expensive features, such as multiroom DVRs and pay-per-view movies. The El Segundo, California-based company gained a net 100,000 customers in the U.S. and 415,000 in Latin America, helped by World Cup soccer matches shown in high definition.
“For the first time in several years, our year-over-year buy rates increased for premium movie channels,” said DirecTV’s Chief Financial Officer Patrick Doyle on the company’s conference call. “In addition to premiums, we also saw a solid year-over-year growth in pay-per-view movies.”
To maintain that growth, DirecTV plans to introduce more premium products by the end of the year. Those include an enhanced cinema selection, and an NFL Sunday Ticket “to go” service that will provide live video streams from games to mobile devices like the iPad or a computer for an extra $50.
Time Warner Cable, based in New York, added 110,000 new subscribers. Its subscription revenue rose 5.1 percent to $4.52 billion as more users selected higher-end services like digital video recorders and the company raised prices.
Still, a cooling economy means employers will resist taking on more staff, raising the risk consumer spending will weaken enough to impact pay-TV providers, too. Time Warner Cable said the sluggish economy limited its second-quarter subscriber gains, and said it saw such weakness continue into July.
“If you look at the key indicators in the economy, things like vacancy rates and unemployment rates - we’re still at exceptionally high levels,” Rob Marcus, Time Warner Cable’s chief financial officer, said on a conference call. “It shouldn’t be terribly surprising that we continue to see weakness in subscriber net adds.”
Initial jobless claims climbed by 19,000 to 479,000 in the week ended July 31, the most since April and exceeding the highest estimate of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington.
Weak housing starts have also affected subscriber growth numbers. Builders broke ground on fewest new homes in eight months in June after the expiration of a U.S. government tax incentive caused sales to slump.
“The market for housing is still terribly soft,” Cablevision’s Rutledge said. “There is virtually no construction of housing going on in our footprint and occupancy rates are still low. So you don’t have any of the wind at our back.”
Growth in the U.S. economy slowed to 2.4 percent in the second quarter from 3.7 percent pace of expansion in the first quarter. The world’s largest economy is recovering after shrinking 4.1 percent from the fourth quarter of 2007 to the second quarter of 2009.