TWX's Unacceptable Basic Sub Losses
A stark contrast: DirecTV touts a record 484K subs Tues, Time Warner Cable reports it lost 11K basic subs in 3Q Wed. Some analysts had expected gains of 5K-14K. "Cable was the Q3 disappointment [for Time Warner]," Merrill Lynch’s Jessica Reif Cohen said in a research note. Time Warner media/communications group chmn Don Logan called the loss "small" but unacceptable. "Our near-term focus is on improving marketing and customer care," he said. "This may take some time, but efforts here should help us sell new products and retain existing customers. Bundles also will be a key to success. … We need to get better at marketing with lower price introductory offers and then up-selling effectively once we have the customer." — Good News on Digisubs: On the upside, it added 72K digital subs, increasing penetration to an industry leading 43%. "By our estimate, that’s 1 full year ahead of Comcast and Cox." TW had 709K DVR customers at the end of 3Q, an increase of 118K. SVOD services rose by 82K subs to nearly 1.4mln. HBO On Demand and AOL’s free on demand music video channel My Music Channel rank as TW’s most popular VOD services. Data was especially strong, with 168K new customers signing. — By the Numbers: Cable revenue rose 10% to $2.1bln, reflecting a 10% increase in subscription revenue and an 11% rise ($13mln) in ad revenue. Its 10% EBITDA growth was, in part, hindered by an estimated $25-$30mln of costs related to rolling out digital phone service to all 31 systems ahead of management’s year-end ’04 expectation, Reif Cohen noted. The cable nets and WB saw revenue rise 8% to $2.2bln. Time Warner as a whole recorded an 8% decline in 3Q earnings thanks to $500mln it set aside in anticipation of settling investigations into AOL accounting practices. The media company recorded $499mln in earnings vs $541mln a year ago. Revenue climbed to $9.97bln from $9.5bln. Time Warner will restate consolidated earnings for ’00, ’01 and possibly ’02 because it should have included AOL Europe results in its own earnings after March ’00.
