Let the sunshine in
It's all about trust. Those cable stock prices will not bounce back until investors do a thorough reevaluation of cable finance and convince themselves that all is on the up and up. And we don't mean only that they find no more John Rigases out there with a $1 million-a-month corporate allowance. We also mean that they become fully comfortable with the way cable operators report their revenue and expenses and earnings. When a cable operator writes a check, investors need to know whether it is going to be subtracted from revenue (and hence earnings) or coded as capital spending and not subtracted. This is the very issue that has a federal grand jury now scrutinizing Charter's books.
What is needed is a common accounting language for cable. For instance, everybody agrees on what a basic subscriber is, right? Not really. There are variations. An apartment building with 100 units that is getting a 20% bulk discount may be counted as 80 subs by one operator but as 100 by another. Here's another: Time Warner Cable treats launch fees from cable networks as ad revenue when virtually every other operator doesn't. Go figure.
So we applaud the effort by Insight's Michael Willner to create a code of cable accounting practices by rallying other large operators around the idea. (See story, page 7.) In theory, the code will make the business more transparent and allow investors to more easily compare and contrast cable companies. In theory, widespread implementation should bring back some of those equity dollars.
As seen on HGTV
Did you read it? Last month, we ran a cover story underscoring that the one recession-proof segment of the TV programming business appeared to be home shopping. While most broadcast and cable networks whine about falling revenue, the video hawkers continue their rapid growth. In fact, as the story pointed out, QVC is now pressing NBC to become the No. 1 revenue-generating network.
You may have set the story aside. But we bet that Ken Lowe and the other folks at Scripps read it. At the time of publication, Scripps was apparently negotiating to buy Shop at Home, No. 4 in the parade of home-shopping channels. Those negotiations last week yielded a $49 million purchase agreement. Although Shop at Home reaches just 42 million homes and reports only a fraction of the revenue QVC and HSN do, we like this deal. Scripps will be able to leverage (and solidify) its relationships with advertisers on HGTV and Food Network by giving them an opportunity to sell directly to viewers on Shop at Home. Also, in a TV programming world increasingly dominated by AOLDisViaGENews Corp., it's good to see Scripps' determination to bulk up and maintain its independence.
Now, what's the S&H on that electric screwdriver?