Time Warner Cable (NYSE: TWC) turned in plenty of good numbers in the second quarter but one particular increase wasn’t among them: residential net video drops were up 15 percent over the same quarter last year, to 130,000 from 111,000. The right kind of increases in other areas, including high-speed data and voice, helped make up the gap and beat estimates as TWC profit increased 23 percent to $420 million on revenue of $4.9 billion in revenue, a 4.4 percent increase.
The number of residential video subscribers is being watched closely for signs that customers are leaving higher priced cable for online video but there’s nothing to suggest a major change. That doesn’t negate the trend: in the past six quarters one of the country’s largest cable operators has gone from 12,543,00 million residential video subscribers to just over 12 million — 12,067,000, to be exact. That’s a decrease of nearly four percent. In the same period, broadband subs rose 5.4 percent, to 9.7 million, from 9.2 million in Q210.
Some people will be tempted to look at last quarter’s video sub drop of 66,000, then at this quarter’s of 130,000 and gasp. Don’t. The cable biz is cyclical and the same kind of drop happened last year. What is worth noting is that the numbers are higher this year over the same quarters last year, and if the same cycles hold true, TWC could be on pace to lose a half-million video subs this year. (The net additions/losses don’t include acquisitions.)
That shouldn’t obscure the big picture. As BernsteinResearch analyst Craig Moffett said in his quick take following the release, looking at the straight financial story, “Time Warner (NYSE: TWX) Cable’s results must be viewed as a home run.”
Update: Asked about cord cutting during the earnings call, TWC CEO Glenn Britt said there is still no evidence that it’s a key factor. “To the best of our market research ability,” Britt said, “the effect right now is very, very modest — and hard to measure because it so small.”
So far, TWC has been affected more by depressed economics and by competitors
Earlier this week, Netflix (NSDQ: NFLX) CEO Reed Hastings used his shareholders’ letter to talk about “cord mending”:
For the second quarter in a row, U.S. MVPD households grew in Q1, adding nearly 500,000 additional households and deepening evidence that cord-cutting in the past was prompted by economic hard times rather than the substitution of over-the-top (OTT) services for cable.
Since MVPD households are growing while online video use explodes, the data suggests that OTT services like Netflix are complementary to, rather than competitive with, cable television. In this way, the growth of Netflix streaming is no different to the prior growth of the DVD rental market – both supplemental to the programming offering of the MVPDs. Our subscribers overwhelmingly enjoy both Netflix and the wide variety of sports, current season TV shows, news and entertainment available through MVPDs.
Will this quarter match that? Given the issues cable usually has with Q2 (seasonal college accounts dropping, etc.), possibly not. TWC is just the first out of the gate.
More to come.