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Tuesday, October 17, 2006

When Content Was King: Will Programming Costs Hurt Cable?

Stocks: (TWX)(CMCSA)(CVC)

Fox raised its rate per subscriber for Cablevision from $.25 to $.75. Cablevision did not have much choice.

Cablevision has three million subscribers, so, it’s a lot of money. Especially if other programmers who have high ratings, like Fox News, follow suit.

Cable companies have been doing well. Their stocks are rising with their annual cash flow. Comcast’s shares, which traded at $26 at the end of 2005, now fetch over $38.

Programming costs are not going to wreck the cable industry, but if content rates go up large cable operators like Time Warner Cable could find that they are paying their content partners tens of millions of dollars more per year.

Arguably, the deal is worse for the cable guys. The content they are paying for is also ending up on the internet, so viewership is becoming fragmented. If IPTV works, telecom customers will be watch the same content.

The content companies may be finding that their income is rising rapidly in the new world of media, but cable companies may not be quite as ebullient.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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