In the latest of what is now developing into what must be a worrying trend for the industry, Moody's Investors Service has cast a pessimistic eye upon the US cable TV industry, downgrading its future outlook from ‘positive’ to ‘stable’.
As reported by leading Wall Street financial news agency Bloomberg business week, Moody’s assessment of the cable TV industry paints a gloomy picture of increasing risk of shrinking profit margins and growth rates in the low single digits.
The US cable TV industry is undoubtedly in the doldrums right now with Credit Suisse also concerned about its prospects and research showing that users are ending their cable services which seem under increasing attack from OTT video services such as Netflix and Hulu.com.
Even though Moody regards the cable TV industry's credit profile as remaining strong and projects revenue and operating earnings growth for the sector to increase between 3-4% through to 2011, it expects demand for packages that offer Internet service, digital video and phone will be significantly muted from now on, said Russell Solomon, a senior vice president at Moody’s talking to Bloomberg.
"We believe that pricing for video service offerings, in particular, has reached an inflection point from which more customers will more actively look to reduce their overall cable bills," Solomon was quoted as saying. The direct consequence of this would be the industry offering additional content to retain subscribers, thus eating further into profit margins.
Solomon did offer the crumb of comfort that theoretically the industry should get a lift from a rebound in advertising and cost-cutting initiatives towards the end of 2010. However even this boost could be wiped out if the generally downbeat economic conditions in the US persist her warned.