$1.1 billion — that’s how much Time Warner Cable (TWC) made in 2009.
That’s net income, not revenues. It compares to 2008′s abysmal loss of $7.3 billion, due to unusual losses like a $14.8 billion non-cash charge it took for the declining value of its cable franchise rights. Revenues for 2009 grew 3.9 percent from 2008 to $17.9 billion, thanks to an increase in DVR service customers, higher video prices and more digital cable subscribers.
Business in 2009 was much better for the cable TV provider. Even though it continued to lose basic cable customers — it lost another 105,000 of them during fourth quarter — Time Warner added more lucrative customers who ordered multiple services such as phone and high-speed Internet.
It ended the year with 12.9 million video customers who paid an average of $69.44 a month. Adding in those who also subscribed to Internet or phone service, Time Warner ended the year with 14.6 million customers who, on average, spent $103.46 per month.
The cable industry faces a major transition as more TV viewers head online or to a rival TV service to watch favorite shows. Time Warner is part of a group of cable providers trying to figure out how to offer paying customers TV shows online. Trials for “TV Everywhere” have started but not in Orange County.
But the company is also dealing with TV channels demanding more money. Over the holidays, News Corp. threatened to pull Fox and related channels if Time Warner didn’t pay $1 per month per customer – a fee that didn’t exist last year. The two settled for an undisclosed amount, reportedly between $0.50 to $0.75 per customer. Just yesterday, the company settled with Food Networks to keep the channel on the air for customers. Again, no details were disclosed.
Such battles could keep cable TV prices going up, leaving many customers looking for alternatives. That is evident in the increasingly lower number of basic cable customers.
But again, the number of Internet, phone and digital TV subscribers continue to rise, helping the company make more money per customer. If anything, customers seem to be trying to save money by spending less on premium channels and videos on demand. Look at the chart below. This shows the change in the number of TV, Internet and phone subscribers. Only the number of TV subscribers is shrinking:
Time Warner Cable
As of 9/30/09
As of 12/31/09
Video subscribers 12,964 12,859 -105 Residential high speed data subscribers 8,874 8,994 120 Commercial high speed data subscribers 293 295 2 Residential Digital Phone subscribers 4,078 4,153 75 Commercial Digital Phone subscribers 58 67 9 Digital video subscribers 8,810 8,866 56
For investors, higher prices means a higher stock price and at least one analyst believes Time Warner’s 7 percent customer price hike this year plus a better economy will boost Time Warner’s stock price by 30 percent, according to a report by Bloomberg News. Its stock price closed today at $44.21, up 1.35 percent.
The other low point for Time Warner last year was advertising. Its advertising revenues declined 21.8 percent from 2008 to $702 million. The downturn was blamed on fewer ads from the auto and media industries plus the absence of political ads. Those are expecting to recover in 2010.
For the fourth quarter, ended Dec. 31, Time Warner reported net income of $322 million on $4.5 billion in revenues, which was up from the year ago’s loss of $8.2 billion on $4.4 billion in revenues.