@ UBS Media Week: TWC's Britt: Cable Will Do Better Than Rest Of The EconomyBut Not By Much
This story was written by David Kaplan.
The conventional wisdom has been that as the crushing economic downturn continues to squeeze consumers, cable TV will benefit as more people opt for home entertainment. Glenn Britt, president and CEO of Time Warner (NYSE: TWX) Cable, was certainly happy to promote that view during a Q&A at the UBS Global Media and Communications (PDF) conference in New York. Nevertheless, he didn't attempt to oversell that view, noting that certain aspects of the business has fallen off. One example is DVR adoption, as demand is down 40 percent, though that could be due to a great deal of cable customers already having taken on the service, he said.
As to whether the negative economy makes it easier to engage in more M&A activity, Britt said it doesn't. "The cable business is a small world and we all know each other. And one thing we all know is that this is not a good environment to sell in." More after the jump.
-- Cap ex will come down. About 70 percent of our cap ex is "success-based," so that will come down a bit.
-- Costs are coming from two big categories. Programming is under pressure from re-transmission consent from sports, and from labor. We have had some restructuring costs related to layoffs.
-- The spinoff: Britt said the company is comfortable with being spun off from parent Time Warner. "We're just waiting for regulatory approval. There are three buckets, first two are state and local franchises. We have those settled in order to close the deal. Then we need FCC approval. To date, the chairman has not put that on the agenda. So we don't know when that will happen."
-- Competitive environment: AT&T (NYSE: T) and Verizon are rolling out their pay TV models. "There's no real change, just more of the same. AT&T overlaps us 40 percent and 30 percent for Verizon (NYSE: VZ). U-verse overlaps us in 12 percent and Verizon sells broadband in about 6 percent of the markets we're in. In the meantime, we're continuing to take voice customers at a rapid rate."
-- Broadband: Britt said he doesn't want to "punish" consumers for using more broadband. However, the question is what is the right structure to encourage more usage and whether cable companies can charge more money for it. Britt: "If we can't pay for it, we can't build it."
By David Kaplan