Cable networks are the only traditional M&E sector to see consumption increase between 2006 and 2009.
Summary: The right blend of advertisers and bundled services give an EBITDA boost to cable networks, cable operators and satellite television. Television broadcasters need to harness the power of online and mobile platforms to see similar growth.
The mix of advertising and subscription revenue helped cable networks weather the downturn well. As cable network audiences continue to grow, they charge advertisers higher rates.
Internationally, multi-channel households are increasing. This creates additional revenue and allows cable networks spread costs over a larger base, boosting EBITDA margins.
Cable networks are the only traditional M&E sector to see consumption increase between 2006 and 2009. In the past few years, cable networks' EBITDA dollar growth slowed, but not by much. Then, in 2009, EBITDA grew by 8% - among the highest in the M&E group.
Cable operators are losing basic subscribers, but making more money from subscribers buying advanced services, such as internet access, high-definition television and digital video recorders (DVRs). These companies didn't fare well in the downturn, but are focused on entering new growth areas such as the small- and medium-sized business market.
Challenges to this sector include:
- Continued competition from satellite and telecom providers
- Customers dropping cable to watch programs on the internet
- Higher retransmission fees paid to broadcasters
- Higher programming costs
- More spending on marketing to stay competitive
Due to these challenge and others, EBITDA dollar growth will be 4% in 2010, compared with 9% in 2009, according to analysts. However, during the 2006-2010E period, cable operators are expected to have the highest estimated EBITDA margins in the M&E group.
Satellite television has seen growth in subscribers and in average revenue per user (ARPU). This is because of advanced services such as high-definition television and digital video recorders (DVRs). However, these areas of growth declined during the downturn, but are expected to return.
Another challenge is that these companies can't provide a triple-play bundle - the service combination of voice, data and video. This makes them vulnerable to both cable and telecoms which can. To overcome this challenge, satellite providers create a bundle by relying on a telecom provider to provide phone and internet services.
Satellite providers' growing ARPUs and maintained subscriber base will positively affect EBITDA in 2010.
Television broadcasting has simultaneously suffered from economic difficulties and from its customers migrating to cable programming, the internet and other entertainment choices.
The good news is that more people are watching TV online and via mobile devices. This allows networks to use existing investments to create new advertising revenues.
Another new profit source for local television stations are retransmission fees from cable companies. These fees go straight to the bottom line, giving a boost to long-term EBITDA dollars and margins.Yet, these recent growth spurts haven't done much to affect the big picture. Over the 2006-2010E period, TV broadcasting is expected to see EBITDA dollars contract by a CAGR of 4% - the second-greatest decline among the M&E sectors. On the positive side, TV station ad revenue improved in 2010, led by improvements in the auto and financial services segments and robust political advertising.
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