The American cable television’s company Cablevision Systems Corporation (CVC, Financial) revealed its intention of forming an association with the country’s top companies namely Time Warner Cable Inc. (TWC, Financial), Comcast Corp. (CMCSA, Financial), and other cable operators during the Internet & Television Expo at Chicago, the trade industry show which was earlier called as The Cable Show. Shares of Cablevision rose 3% to $20.97 on the New York Stock Exchange in afternoon trading and further reached a high of $21.91.
Profits Posted
Post the news; trading of more than 18.9 million shares was witnessed as compared to a daily average volume of 3,233,430 shares. The gross profit margin was also recorded at a higher level of 50.71%. Although the results were below industry average and at some places even below its own previous performances, the company still managed to put itself in the category of profiteers. Revenues also increased 2.5%.
Consolidation Criterion
The New York based cable company initially found in 1973 is run under New York’s Dolan family with primary operations in Greeter New York area. The company is the eighth largest cable provider in the United States with majority of subscribers from New York City along with New Jersey, Connecticut and parts of Pennsylvania.
In an effort to consolidate in US market, the company has shown interest in the aforesaid deal taking it as a measure to solidify its presence in the market and increase both subscriber base and revenues. The company is of the view that this consolidation will not only bring stability in pricing but also attract more customers. Time Warner Cable, with whom Dolan is eyeing a merger, has operations all across the New York City except in Bronx where coincidentally, Cablevision has a strong presence. This can be another reason why the coming together of the two companies would be mutually beneficial. Cablevision also expects to bring about a decline in the losses in broadband business due to video subscribers backing off since the last 11 consecutive quarters.
Considering the rapid growth of entertainment through Internet and streaming services, coming together for the cable industry players is of utmost importance. Popularity of satellite TV is another threat along with budding companies like Netflix Inc. (NFLX, Financial), which offers online video-streaming service.
Counter measures
Going with the flow, Cablevision has also adopted some of the popular services present in the market. The company announced about offering Hulu’s video streaming service to its customers under its optimum plans and also promised to offer HBO’s standalone streaming service, HBO Now, to its Optimum Online internet customers. In January 2015, the company had also shared its plans of offering a Wi-Fi only cell service dubbed Freewheel by February 2015.
One thing, which the company made clear, was not to enter any kind of deal with Verizon Communications Inc.’s (VZ, Financial) FIOS Television and Internet service.
Outlook
Going forward, Dolan has expressed his opinion on the working of all cable operators as ‘one market’ and not as ‘one Company’. This is required to establish a strong foothold and get rid of growing anxiety owing to Internet popularity. As of now, the offer was made casually which got a casual response too but what future holds for the cable industry in the US depends upon how seriously Dolan’s viewpoint is taken in the cable TV fraternity.
