Hello again, and a week in review

Apologies for the extended neglect of this blog. It will start to get updated much more regularly from now on...

The following article was published last Friday on TC+M's web site, which you can access free of charge for the latest media news: http://www.totalcontentandmedia.com

The Cable Cabal

As the dominant pay-TV service in a market of committed couch potatoes, cable has had a good ride in the U.S. so far.

This week, the feelgood factor continued as media figures extolled the virtues of cable at The Cable Show, the annual confab for the National Cable and Telecommunications Association (NCTA), in Las Vegas. Jeff Bewkes, the COO of Time Warner, said he believed that cable could potentially rival the Internet in terms of its flexibility of use and attractiveness to advertising.

The investments the cable operators have made in innovation have paid off so far: Comcast, Time Warner Cable and Cablevision have all posted double-digit revenue growth as a result of their triple-play service offerings.

Now some cable providers are getting even more bullish and suggesting even bolder offerings, such as screening films as they are premiered on big screens.

Outside the Vegas desert, there are clouds, of course.

In addition to heavy investment from IPTV competitors like Verizon and AT&T, U.S. cableco's are bracing themselves for regulation that could threaten their pole position.

In the name of letting parents opt out of violence-peddling channels, the FCC is considering forcing companies to liberalise how they offer channels, from their current package structure to an a la carte selection. This would hit margins hard for cable operators.

They may also be forced to 'unlock' their digital set-top boxes so that people potentially can use them to switch from one provider to another. But as yet neither of these issues is squeezing margins—and the powerful cable lobbies will make sure that it stays this way.

Further afield, the message of strength coming out of the U.S. this week was countered by a more sombre picture in the U.K, where Virgin Media reported an operating loss of £15.3m for the quarter that ended 31 March, compared to a profit of £9.2m for the quarter before.

Virgin Media is blaming satellite competitor BSkyB. The breakdown in negotiations to carry Sky-owned channels on Virgin Media's cable service has played a role particularly in terms of customer acquisitions, said chief executive Steve Burch. These fell by 11.9%, their lowest level for a year, with subscribers to its cable TV and broadband services falling by 46,900 over the quarter. A year earlier subscribers had grown by 28,500.

But another issue for U.K. pay-TV providers is what the addressable market is for new customers really is.

When BT launched IPTV at the end of 2006, it wanted to target people not yet receiving any kind of premium TV service. This is actually a big number—at the time of the BT Vision launch, it was some 14 million homes (compared to 11 million already getting pay-TV services). But so far BT has only reported some 5,000 subscribers, and Virgin Media too has shown some difficulty in reaching what Gavin Patterson, the consumer products MD for BT Vision, calls 'the refuseniks.' BT incidentally kicked off a £1 million ad campaign this week; we'll see where that takes them.

The silver lining for Virgin Media has been in the area of triple play. Currently 42.9% of its subscribers take television, broadband and phone services in combined packages, compared with 34.9% in the year earlier period. This however is still not offsetting other losses as it has in the U.S. market.

One example of how to cope with the loss of select content on your cable network might be found in Germany. Premiere, the largest cable provider in the country, had some good news this week as it swung back to profit in the first quarter (which ended 31 March), posting net income of €4.5m compared to a loss of €18.3m in the same quarter a year ago.

While revenues decreased to €224.3 million versus €273.3 million a year ago, largely on a reduced customer ARPU (€261 from €308), Premiere's biggest achievements were cuts in its operating costs by some 29% over the same period the year before; and a rise in customer acquisition rate over the fourth quarter of 2006: 50,582 versus 36,058. The total number of customers to date is 3.46 million.

Premiere is still adjusting to losing exclusive rights to show the highly popular Bundesliga football league fixtures, which went to its competitor arena, owned by Unity Media.

Premiere has a resale deal to continue providing coverage of the games, but there are still questions in the air about how this will impact the company. Currently the marketing around those channels is being investigated by Germany's Cartel office, and the outcome of that may affect Premiere's full-year forecasts.

Yet Premiere is not hanging its star on the outcome of the Bundesliga decision, or even on its successful cost cutting. Later this year, it's launching a new pay-TV satellite package. Using a new wholesale service from SES, it will play on the long-tail concept and offer a variety smaller channels that have not yet been seen in the German market. The name for the service? Premiere Sky.