Content’s kingdom a worry for cable

Content is king, but America’s distributors still look pretty regal.

Geography and lobbying have conspired to allow effective local cable monopolies across much of the country, guaranteeing profit margins and cash flow that other countries’ pay-television companies envy. The US cable and satellite sector is up 20 per cent so far this year, after an S&P-beating 10 per cent gain last year. Comcast, the country’s largest cable provider, is also its largest media group, outstripping Walt Disney, News Corp and Time Warner in market value. “I’ve not detected this kind of optimism from cable distributors for years,” says Jerry Kent, a co-founder of Charter Communications (the fourth-largest US cable company) who now runs Suddenlink (the number seven, with revenues of $1.9 billion and 1.4 million customers). As a $350 million network upgrade reaches its end, “we’re finally on the cusp of becoming what I like to call a cash-generating machine,” he says. “Our cash flow is going to be tremendous.”

But Kent has one concern that media investors should pay attention to. “The single issue I worry most about,” he says, is the rising cost of content. The growth story at companies from Discovery to News Corp has been underpinned by their seemingly unthreatened ability to charge ever greater prices for their programming.