Cable TV industry goes from high to low in a year

CHICAGO —  It hasn’t been a good year for television.

That seems clear from this year’s annual convention of the nation’s pay-TV industry here.

The lofty expectations from last year’s gathering of the National Cable & Telecommunications Assn. have given way to this year’s anxiety over digital disruption. The most obvious sign? A new name for the massive event — the Internet and Television Expo — a nod to the rising threat of online platforms and streaming services.

Gone is last year’s buzz about Comcast Corp.’s audacious $45-billion bid for Time Warner Cable Inc. That deal is dead. The renewed ratings strength at major programming companies such as NBC and Viacom last year? It’s been a struggle. And 21st Century Fox Chairman Rupert Murdoch’s play for Time Warner Inc. ended up failing.

“It’s an interesting time for the cable TV business,” Richard Greenfield, media analyst with BTIG Research, said Monday. “The chessboard keeps wanting to be reset, but at the same time the business is increasingly threatened by rapid growth of Internet video.”

Top executives of all the major cable companies, as well as top government regulators, plan to attend the cable convention in Chicago, which begins Tuesday and typically draws more than 10,000 attendees.

This year’s key topic is expected to be how well the cable industry can weather the digital storm that looms over the landscape. Sluggish ratings at major cable and broadcast networks are giving industry leaders more cause for concern.

Conventional media companies have been roiled by consumers’ increased use of high-tech devices to watch TV shows and films, and that’s led to slumping television ratings.

For instance, half of pay-TV homes are equipped with digital recorders that enable them to watch shows on their own schedule. And Netflix says it has more than 40 million subscribers — more than HBO. In the last six months, Dish Network, HBO and CBS have introduced streaming services that could further chip away at the foundation of the cable TV business.

What’s more, a telephone company, AT&T Inc., is expected to claim the crown as the nation’s largest pay-TV provider this summer should the federal government give its blessing, as expected, to the company’s $49-billion acquisition of DirecTV.

“It would be naive to think that the media world remains the same and past playbooks will work,” media analyst Michael Nathanson of MoffettNathanson Research wrote in a report on the weakness at Viacom Inc., which has seen its fortunes plummet in the last nine months.

That was evident when Comcast rolled out first-quarter earnings Monday.

Comcast’s first-quarter results sailed past Wall Street’s projections. But what generated the most talk was the Philadelphia company’s report that the number of people who subscribe to its Internet service surpassed its cable subscribers for the first time during the quarter. Comcast gained 407,000 high-speed Internet customers but lost 8,000 cable subscribers in the first quarter.

The company’s 22 million broadband subscribers across the country mark a significant turning point for the company, and signal the broader shift in the cable industry.

Brian Roberts, Comcast’s chief executive, declined during a call with analysts Monday to dwell on his company’s failure to land Time Warner Cable. He said that he had wanted to bring Comcast’s cutting-edge products to Los Angeles and New York.

“The government ultimately did not see it the same way,” Roberts said. “Of course, we are disappointed. It was a unique one-off situation. But we really, really have moved on.”

Exactly how the industry adapts as more people cut their cable cords will probably shift to speculation about deals. Roberts said his company will remain disciplined, though analysts have speculated Comcast might look internationally or even get into the wireless business to better compete with AT&T.

Comcast shares rose 37 cents, or less than 1%, to $58.78 Monday.

Meanwhile, there’s still plenty of speculation about what’s next for Time Warner Cable.

John Malone, the cable mogul who controls Charter Communications Inc., appears willing to take another run at TWC. Charter’s $135-a-share bid for Time Warner Cable was rebuffed last year and helped ignite talks between TWC and Comcast.

Some analysts predict that Malone might have to pony up as much as $180 a share if he makes a fresh bid. Time Warner Cable shares rose $1.84, or 1.2%, to $159.09, while Charter shares edged up 6 cents, or less than 1%, to $187.49.

Both companies declined Monday to comment on whether talks toward combining were already are underway. Buying Time Warner Cable would give Charter more than 16 million subscribers, including 2 million TWC subscribers in Southern California.

“Charter [powered by Liberty Broadband] is desperate to buy Time Warner Cable to attain the industry scale its investors are expecting and build a presence in key major U.S. markets,” Greenfield wrote in a report Monday.

After the cable conference, the TV industry will pack up and head to New York and the start of the annual upfront advertising sales process. But this year, the broadcast networks are entering the sales season with their weakest hand in years because of the lower ratings and the few breakout TV hits to celebrate.

Instead, the networks are bracing for the second straight year in which overall ad dollar commitments are down. Last year, the broadcast networks collectively took in more than $600 million less than they did in 2013.

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