Gross Profits Decline For Cable, Diversification Adds Revenue Sources

 

• by Wayne Friedman , June 23, 2017

Traditional cable TV operators' continued loss of video subscribers will translate into lower gross profit margins over the next four years -- with other company businesses looking to carry more of the load.  

Big cable companies such as Comcast and Charter Communications, as well as smaller cable operators like Cable One, will see a steady erosion of gross profit margins per video subscribers in the coming years.

Craig Moffett, media analyst at MoffettNathanson Research, says Comcast’s average gross profit margins from its video business will drop by 13% in four years -- to $37.18 by 2021 from $42.58 this year.

Charter will decline by a steeper level -- 28% -- to $19.12 in four years, from $26.77 in 2017. Smaller cable company Cable One is projected to drop 27% to $22.63 in 2021, from a $31.09 estimate in 2017.

With regard to the new virtual (Internet-delivered) multi-video channel program distributor businesses, Moffett says: “None of the current crop of vMVPS appears even remotely poised to make any money.”

But Moffett notes that current diversification in broadband, phone and other businesses will help buffer cable operators' video business declines. Video gross profit margins are only about one-third of total gross profit at Comcast, 25% at Charter, and 21% at Cable One.

Gross profit margins for broadband and phone businesses are much higher -- at 95% and 85%, respectively, says Moffett.