Cablevision posts narrowed loss, higher revenue
Copyright 2003 Newsday, Inc.
Newsday (New York)
May 14, 2003 Wednesday ALL EDITIONS
Cablevision Systems Corp.'s net financial loss shrank in the first quarter, helped by strong gains in high-speed Internet and digital-cable TV customers, the company announced yesterday.
But following defections by cable TV subscribers last year over the YES Network impasse, the company said it continued to lose customers overall in January and February - partly because major shifts in channel lineups got subscribers riled up. It has since begun to reverse that trend, executives said.
Higher programming costs as part of the 6-week-old deal to end the bitter YES dispute and carry the Yankees network have cut some expectations for 2003 financial results, the company said.
The net loss for the first quarter narrowed to $140 million from a loss of $250 million in the first quarter of 2002. Operating income gained 69 percent to $61 million. Revenue gained 7.8 percent to $982 million.
Cablevision's stock price fell yesterday 7 percent, or $1.56, to $20.24.
Overall, Cablevision lost 11,555 cable TV subscribers in the first three months of 2003, following last year's drop of 44,740, or 1.5 percent. Tom Rutledge, president for the New York metro area, where it has 3 million customers, blamed this year's subscriber drop on a major realignment of channels. "It was a very disruptive process," he said.
Following the early subscriber losses, Cablevision added 4,700 customers in March, 6,500 in April and 6,300 so far this month, so executives stuck with a forecast of a half-percent gain for all of 2003.
That prediction was buoyed by an increase of 184,875 Interactive Optimum customers, to 401,420 as of March 31. The digital cable TV service stumbled for several months after it was introduced in late 2001. The number of iO customers now stands at 505,000, with an average of two digital boxes each.
Meanwhile, Optimum Online had its best first quarter ever. Cablevision executives said the high-speed Internet service has seen no effects yet from a recent price cut by Verizon Communications for its competing digital-subscriber-line service. Verizon DSL now costs $34.95 a month compared to $49.95 a month for cable modem service, or $44.95 a month for certain video subscribers.
"Despite competition from DSL providers, we continue to have great success," Rutledge said.
Optimum Online added 82,710 customers, for a total of 852,835. Rutledge credited higher speeds than DSL for helping create strong demand. "It's a substantially different product," he said.
In the YES dispute, at the end of March, just in time for the new baseball season, Cablevision agreed to start carrying it and pay the network $2.12 per month for each customer who gets it. That extra cost led Cablevision to predict yesterday that EBITDA, an adjusted measure of operating income, for its New York-area cable and communications services will rise between 16 and 18 percent this year, down from a February forecast of 18- to 20-percent gains.
The shift to YES of the Yankees and the New Jersey Nets - which used to be carried by Cablevision-controlled MSG Network and Fox Sports New York - hurt the company's Madison Square Garden division. The unit's revenue inched up only 0.6 percent to $208.4 million as fees paid by advertisers and by cable companies for MSG Network and Fox fell. The unit's operating loss narrowed to $1.8 million from $3.5 million, as the luxury tax paid on the New York Knicks payroll decreased.
Cablevision also revealed that its sports programming partner, News Corp., which is lowering its stake in Fox regional sports channels in Chicago and San Francisco from 70 percent to 40 percent, is getting $150 million in the transaction over three years.
The agreement with News Corp. in January was one of several steps the company has taken since last August to restructure Cablevision and lower its debt, which is now at $7.8 billion. The steps include 3,000 job cuts, the shutdown of The Wiz retail chain, the sale of the Bravo network to NBC and the impending sale of cell-phone-service licenses to Verizon.
One part of the plan, the planned sale of the Clearview Cinemas chain, has raised $28 million from the sale of two theaters, still leaving another 15 or 16 theaters unsold so far, Cablevision said.
The company, which has been testing an Internet-based telephone service on Long Island, plans to roll it out widely in the third quarter, adding equipment from Siemens AG.
Operating income for the Rainbow Media unit of Cablevision, which includes AMC and Independent Film Channel, was $16 million, compared with a $2.7-million loss a year earlier, as revenue rose 16 percent to $176.6 million, the company said.