Cablevision: Nearly 19% Rev Jump In 4Q, Marks Interactive Ads For Future Growth

Cablevision is looking to the future. It has held discussions with other large cable operators, such as Comcast and Time Warner, about creating a national network that allows for interactive ad buys--although activation is a ways off, a company official said Tuesday.

COO Tom Rutledge characterized the conversations as "pretty rudimentary," possibly because of infrastructure and revenue-sharing hurdles, adding: "In the long run, there's an opportunity there." Cablevision serves some 3.1 million homes, perhaps only one-fifth of Time Warner Cable's footprint and far less than Comcast.

But Rutledge also said Cablevision is counting on revenues from interactive ads to propel growth going forward--although he noted they would not be significant in 2007. The company can no longer count on exponential increases from upgrading video customers to its digital services, since it says an industry-high 78% of its TV customers have digital cable.

Rutledge's comments came on a call with analysts in which Cablevision reported an 18.6% revenue jump to $1.1 billion for its cable TV business in the fourth quarter. The company also said ad and sponsorship sales for its AMC, WE and IFC channels, part of its Rainbow unit, surged by 27.6% in the quarter. It declined, however, to cite specifics by breaking that figure out from the $160 million in revenues the networks posted. (The networks all experienced distribution increases.)

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Rainbow CEO Josh Sapan suggested more growth could come if the division opts to boost the commercial load on AMC and WE. "We are generally a couple of minutes under what the norm is in the business, so that is an option for our future," he said on the call.

Cablevision declined comment on the future of the Rainbow unit--whether it could be taken private, sold or spun off--in the wake of speculation that John Malone's Liberty Media might be interested in acquiring all or part of it.

In addition to interactive ads, Rutledge said Cablevision's core business would grow by enticing more Internet and phone customers as well as in other video areas, particularly adding foreign-language channels and selling them as stand-alone tiers. With the growing number of Spanish speakers in its New York-area base, the company said it launched 60 foreign-language channels in 2006. Persuading more consumers to pay for its DVR service and subscription video on demand offerings were other future growth opportunities that Rutledge cited.

Still, Cablevision does face some growing competition in its territory from Verizon, which is gradually rolling out a telco TV offering. Similar to Cablevision, it sells TV service in packages with Internet and phone offerings. In general, Rutledge dismissed any imminent threat, and said Cablevision would successfully fight Verizon and any telco-TV entrance from AT&T much like it fought competition from satellite and other video operators in the past.

But he did cite statistics showing that in two communities where Verizon has challenged Cablevision for a full year, covering 16,000 TV homes as potential customers, Cablevision's penetration in video subscribers has declined by 5.5%.

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