OTTAWA – The cable industry saw solid signs of an end to the erosion of its traditional customer base in 2004.
The number of cable television subscribers 7.6 million at the end of August 2004, up 0.4% from a year earlier. “This modest increase followed four consecutive years of decline during which the industry lost a total of 442,000 multi-channel video services customers," says a report on the industry issued today by Statistics Canada.
Despite the turnaround, the overall market share of cable operators continued to decline last year as the two DTH companies continued to sign up new customers, albeit at a far slower rate.
“Wireless competitors, principally direct-to-home satellite television providers, increased their market share to 23.4% in 2004 from 22.5% in 2003,” says the report. “This was the smallest year-over-year gain since the introduction of competition late in 1997.”
As of August 31, 2004, there were 2.3 million subscribers to satellite and wireless cable television, a 5.4% increase compared to the previous year.
The total number of subscribers to multi-channel video services increased 1.5% to 9.9 million. This overall increase was about the same as the gain in the number of households.
The increasing popularity of digital cable was certainly a factor behind the improved customer loyalty for the cable industry, said Statscan.
Digital cable was the fastest growing market segment for the industry last year. There were 1.8 million subscribers to this service on August 31, 2004, “a huge 33.5% increase from a year earlier,” it reads.
Just over 24% of subscribers to cable television had adopted digital cable at that date compared to 18% in 2003.
High speed Internet continued to be a high growth market for cable operators. The number of subscribers to Internet by cable increased 20.1% to 2.8 million between August 31, 2003 and August 31, 2004.
This compares with gains of 26.1% in 2003 and 35.4% in 2002.
Last year’s increase in subscriptions was robust in both large communities, where the gain was 19%, and small- and medium-sized communities, where it was 25.3%.
The financial performance of the cable industry improved significantly last year. Revenues rose 7.4% to $4.8 billion, while operating profits surged 39.2% to $1.1 billion. Cable operators earned 23.2 cents of operating profits for every dollar of revenues in 2004, well above the 17.9 cents earned the previous year.
The financial performance of the wireless segment of the industry also improved, “but the ink at the bottom of the income statement remained red,” says the report, which counts satellite as wireless for its purposes.
Besides Bell ExpressVu and Shaw Communications’ Star Choice, wireless television providers also include small operators such as Look Communications in Ontario and Quebec, SkyCable in Manitoba and Image Wireless in Saskatchewan.
“Wireless competitors have incurred losses before interest and taxes every year since joining the industry, but are now approaching the break-even point. In 2004, wireless segment losses amounted to $92.9 million, down from $110.1 million in 2003 and $245.9 in 2002,” says the report.
From 1998 to 2004, the segment’s loss before interest and taxes totalled $1.5 billion, or 32.5 cents per dollar of revenue earned during that period.
In a few short years, the multi-channel video services market has changed drastically. In 2004, 42% of the 11.2 million subscribers to multi-channel video services had chosen digital over analogue services. In 2000, that proportion was barely above 15%.
