Pay TV: Shelter from the storm?

February 3, 2009

Safe haven. Two magical — and mysterious — words. Cable and satellite companies didn’t fit the safe haven bill in 2008, but 2009 just may be there year.

According to a Reuters story out today, “cable and satellite service providers now hold the promise of strong free cash flow growth as they retain old customers but spend less on deploying set-top boxes and digital video recorders due to a fall in new subscriber growth.”

Remember, however, that before the economy fell apart, a number of investors considered the pay TV industry “recession proof.” The argument went that even in the toughest of times, Americans would stay home and watch TV, saving money on trips to movies or out to dinner.

But this argument overlooked a number of factors that have really undermined the industry. For example, fewer people are moving into new homes, and those that do aren’t likely  to spend their savings on discretionary channels like HBO.

Before jumping on the bandwagon, however, it may be wise to take a look at some of the earnings coming up over the next couple weeks. Start with Time Warner Cable tomorrow, that should be a good gauge of whether these guys really can provide shelter from the storm.

Keep an eye on:

  • The age of Obama dawned with a wake-up call to the U.S. television industry to get serious about Internet-based sources of revenue (Reuters)
  • Barry Diller’s Internet media company IAC/InterActiveCorp posted a fourth-quarter profit on Tuesday after benefiting from the sale of a Japanese TV shopping channel last December (Reuters)
  • Sirius XM Satellite Radio later this month will have to find a way to handle $174.6 million in debt that is coming due (Wall Street Journal)

(Photo: Reuters)

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