As if U.S. cable TV executives don’t have enough to worry about these days, what with the faltering economy, growing competition from phone and satellite rivals and now: irate shareholders.

Comcast, the U.S. largest cable operator, received a letter from one of its largest shareholders calling for the head of Chief Executive Brian Roberts. Chieftain Capital Management, an investment advisory firm with around 60 million Comcast shares or 2 percent of the outstanding float, is deeply unhappy with the 40 percent drop in the stock last year. We have a link to the letter here via Pali Research.

Chieftain — which manages around $5 billion in funds of which Comcast is just under a third — believes Roberts’ reluctance to take on more debt to buy back more shares or to pay a regular dividend are just a few of the missteps that led to the shares’ current parlous state.

“We want and deserve the best CEO Comcast’s board of directors can find — and, based on his record, Brian Roberts is not it,” said the Chieftain letter.

According to Chieftain, Comcast’s management has been a “Comcastrophe” a play on Comcast’s “Comcastic” ad campaign. Ouch.

But it’s not all bad for Roberts.

Comcast’s PR folks were quick to point us to Institutional Investor magazine’s survey of portfolio managers and analysts for the Best CEO in the cable and satellite sector, which was published this week. No prizes for guessing the survey’s favorite cable guy is Roberts.

Also Richard Greenfield of Pali Research doesn’t agree with Chieftain’s thinking that Comcast needs to lever up because, as he sees it, the company is in a ‘war’ with everyone from phone and satellite companies to Apple and wireless and needs to spend more to win.

Others think that if Comcast commits to returning some of its free cash flow to investors as a regular dividend that might make the stock more attractive to a wider range of investors. See our analysis here.

(Photo: Reuters)

After all the fevered expectation that built up last year, it turned out that Charlie Ergen, founder and CEO of EchoStar Communications Corp, did not sell his DISH Network satellite TV business to AT&T Inc. But he did spin off his set-top box unit EchoStar Holdings under the ticker SATS. There was also some insider selling at the time, which gave the impression a company sale wasn’t imminent.

And then we learned Ergen was preparing a bid for wireless spectrum in the upcoming U.S. FCC 700MHz auction. Such a move arguably ruled out any merger talks with AT&T , which is also bidding as FCC rules do not allow two bidding parties to talk with each other.

So end of story, right? Citi analyst Jason Bazinet doesn’t think so.

Bazinet, you may recall, got DISH shares jumping last year when he suggested there was a 65 percent chance that AT&T would buy EchoStar. In a new note published yesterday, he says:

Contrary to popular belief (and our prior view), tax-free SATS spin doesn’t thwart M&A for two years. And while insider selling was large in magnitude, it was narrow in breadth, suggesting M&A cannot be ruled out. Finally, the 700MHz auction delays, but doesn’t preclude, M&A.

We can’t help but wonder if CEO Ergen will sell DISH, but embed a long-term (above market) set-top-box contract into a sale agreement. This sort of scenario would allow Mr. Ergen to capture more M&A upside if he increases his SATS stake or takes SATS private.”

(Photo: Reuters)

This year’s Super Bowl advertising rates may be hitting record levels, but not everyone who has a spot is sure they want one. At least that seems to be what car maker Hyundai is saying, according to stories in the WSJ, AdAge and Automotive News.

The U.S. unit of the South Korean car company is seriously considering pulling its two booked spots from the Super Bowl ad fiesta because of concerns about the slowing economy. The company is said to be worried that taking out high-priced ads in the current environment might not sit well with consumers.

Super Bowl XLII which takes place on Feb 3 will air on the Fox Network and is pretty much sold out. Prices for the some of the 30-second ad slots have topped $2.7 million to $3 million.

Overall, though, advertisers believe that with the Hollywood writers’ strike, declining television ratings and the budgetary pressures that accompany an economic slowdown makes the Super Bowl more attractive, rather than less attractive, according to this Reuters analysis.

 Keep an eye on:

• Goldman Sachs top media analyst quits to join NFL - Reuters
• Apple unveils super-thin ‘Air’ laptop, Web rentals but investors are unimpressed. Reuters
• Oprah Winfrey gets her OWN network in partnership with Discovery Communications. Reuters, New York Times

 American Idol rocks.

So says everyone from Madison Avenue to Wall Street as U.S. television’s top show returns to the Fox network tonight. And as if the bubbliness of Paula and sarcasm of Simon were not enough to keep the TV talent competition show top of prime-time, commentators believe it could do even better than usual thanks to the ongoing Hollywood writers’ strike.

American Idol, which generally airs twice a week, averaged over 30 million viewers per episode last season and could beat those numbers this season. But it’s in advertising that it could really outperform, according to this Reuters story.  Advertising rates have soared — reaching more than $900,000 in the scatter market for a thirty second spot — as marketers look to buy time alongside one of the few guaranteed ratings winners amid the writers’ strike.

RBC Capital Markets analyst David Bank said “Idol” was one reason he’d buy up News Corp shares before the company reports quarterly earnings this season.

“Ratings success is making Fox (the) best positioned broadcast TV network to take advantage of strong scatter pricing,” Bank wrote in a research note today. “Return of American Idol (tonight) should bolster ratings against minimal original content competition due to the ongoing writer’s strike.”

 Keep an eye on:

- IAC/InterActiveCorp’s Ticketmaster has agreed to pay $265 million for TicketsNow Inc, a Web site that resells tickets to concerts and sports events - WSJ

- EMI confirms restructuring, plans to cut 2,000 jobs - Reuters

- Wireless service company Clearwire says it will offer its customers applications such as e-mail and calendar from Web search leader Google - Reuters

Comcast, already the largest U.S. cable television operator with 24 million subscribers, says it’s now the fourth largest U.S. residential phone service provider, too.

Chief Executive Brian Roberts is telling the Consumer Electronics Show audience that his company has made that mark less than three years after it started touting its digital voice service. 

Comcast can’t officially give us an exact number of phone customers until it publishes its fourth quarter results at the end of the month. But a source close to the company points to the fact Comcast had 4.1 million phone subscribers at the end of the third quarter and has been growing at a pace north of 500,000 a quarter for the last few periods.

This is important from Comcast’s perspective not just for bragging rights but because market perception is that the phone companies are winning the battle of convergence with their new advanced video services.

Back in November Wall Street research analysts at Oppenheimer & Co. pointed out that in the third quarter U.S. cable operators lost 185,000, or 2 percent of their TV subscribers, while the phone companies added 277,000.

But the cable companies, led by Comcast, added 1.2 million phone subscribers while the phone companies lost 1.146 million of their core residential landline customers.

Yet even while Comcast wins this battle it may be losing the financial war. Its shares have plunged 40 percent since the end of January 2007, while AT&T and Verizon were two of the best performing stocks in 2007, up 13 percent and 14 percent respectively over the same period.

(Photo: Reuters/Comcast CEO Brian Roberts)

To listen to the moaning of music industry executives like Doug Morris, CEO of Universal Music or critics like Richard Greenfield, analyst at Pali Research you would have to believe the music business is in a pretty bad way. And the proof’s in the numbers: Nielsen SoundScan retail figures have shown year-on-year sales figures for most weeks through 2007 slipping between 15 to 20 percent.

But eMusic, the digital music retailer which sells music from independent labels with few mainstream chart-toppers, says things are going just fine. eMusic said it had its best ever Christmas period since it was founded four years ago beating its own estimates by a whopping 100 percent to add 50,000 paid subscribers and now has a total of 400,000.

eMusic Chief David Pakman told us that his company, still a distant number 2 to Apple’s iTunes Music Store, has benefited from being a purveyor of the kind of rare and more mature style of music that adults will pay for. According to Pakman even the music industry’s trade body RIAA  has acknowledged that for the first time more people aged over 25 are buying music than people under 25. The younger group were traditionally the drivers of popular music sales but perhaps now believe music should be free.

Pakman says his company is successfully riding the wave of the long tail with many more small hits selling 20,000 to 50,000 copies rather than one or two really big hits selling millions. “I’m sure there’ll be less than five albums that sell 3 million this year.”

(Photo: Reuters / Universal Music CEO Doug Morris)

Viacom, home of MTV and Paramount Pictures, is teaming up with Microsoft, parent of the Xbox and MSN, in a deal that covers advertising, content licensing and gaming.

The companies haven’t disclosed financial terms but said the deal has a projected base value of around $500 million over the an initial five-year term of the agreement.

Details include:
-Microsoft will license TV shows and movies from MTV, Comedy Central, BET and Paramount for use on MSN and Xbox 360.
-Microsoft’s Atlas unit will place the ads for Viacom’s U.S. Web sites, while Microsoft will buy ads on Viacom’s broadcast and online networks for a five-year period.

- Viacom will be a preferred publishing partner across Microsoft’s casual gaming platforms.

Keep an eye on:

• Microsoft co-founder Paul Allen bids in U.S. wireless auction. (Reuters/Scientific American)
• MTV takes on Hollywood producer Jerry Bruckheimer to develop video games. (New York Times)
• U.S. FCC eases media owner rules. (Reuters)

As one of the world’s most powerful men in the fast-changing media industry you might think FCC Commissioner Robert McDowell might be a first mover or a maven when it comes to new technology. Wrong.

“I come from fine cheap Scottish stock so I tend to not be an early adopter,” McDowell told us at the Reuters Media Summit. “I have cable TV but I’m an analog basic subscriber with only expanded basic.”

But it turns out McDowell will try out ‘new’ technology if there’s savings in it for him.
“I did beta test an early VOIP company that later became infamous, the technology worked fine but they had a business plan problem…Their name was SunRocket.”

McDowell who also confessed to being a recovering ‘Crackberry’ addict said the FCC has given him six phones (note: not paying the bills) one of which is an encrypted phone, which he says he’s never needed to use. “It has this high falutin’ security clearance but I’ve never once seen anything exciting or interesting or had to say anything secret.”

Oppenheimer & Co’s analysis of third quarter pay-TV subscriber numbers provides a good look at how the worlds of cable and telecoms are increasingly intertwined.

U.S. cable operators lost 185,000, or 2 percent, of their TV subscribers during the quarter while the phone companies added 277,000.

But the cable companies added 1.2 million phone subscribers while the phone companies lost 1.146 million of their core residential landline customers.

This means cable increased its share of residential phones to 14.4 percent, while phone companies now have 1 percent of video (this doesn’t include their satellite TV marketing partnerships).

It appears cable has the edge over phone when it comes to stealing customers from each other. Unfortunately for cable executives though, the stock market doesn’t seem to care. Cable shares are down more than 30 percent this year while AT&T is up around 6 percent and Verizon up around 15 percent.

You may take market share, but you can’t take away market skepticism.

(Photo: Reuters)

Blame the New York Times for the spluttering over coffee at the Saturday breakfast tables of senior cable executives this weekend. The story claimed the U.S. Federal Communications Commission is preparing to impose new regulations to open up the cable industry if the industry is found to have grown too big under a so-called “70/70″ rule, which kicks in if cable is available to 70 percent of U.S. households and if 70 percent of them subscribe.

If imposed it could force operators to carry independent networks or put it cap on how widely any single cable owner can reach. By Monday, Sanford Bernstein analyst Craig Moffett said the story had overstated the current situation.

He writes: The basis for invocation of the 70/70 rule appears untenable. The 70/70 rule requires that cable be available to 70% of U.S. households (it clearly is) and that cable have reached 70% penetration of those households (it isn’t close). By our estimation, cable penetration of cable-available homes is between just 50 and 54%. We don’t believe any study could conceivably satisfy the 70/70 rule.

Brace for a showdown.

(New York Times)

Keep an eye on:

• The Hollywood screenwriters strike is less than a week old, but already concerns are spreading that a long walk-out could drastically change the face of television advertising. (Reuters )
• Walt Disney plans to enter the Japanese mobile phone market early next year using local carrier Softbank Corp’s network. (Reuters )
• Google is secretly talking with Simon Fuller, the British entrepreneur behind the Spice Girls, about a joint venture, prompting speculation that Google’s plans for the TV market include generating original content and competing with major broadcasters. (Guardian)
• Bloggers are gaining momentum in China, the world’s top jailer of journalists. (Reuters Video, Below)

(Photo: Reuters)