Despite declining subscriptions, major cable TV companies like Comcast and Time Warner Cable are heading upwards in the S&P media index this year, and the main draw isn’t what the cable companies are doing, it’s what they’re not doing: business in Europe. The two largest US cable companies appeal to investors who want to avoid the fallout from Europe’s debt crisis and fluctuating currency, according to a report from GulfNews.com.
These gains do not mean cable companies are out of the woods, however. The specific gains show nothing about what the cable companies’ business is doing; portfolio managers are using the relatively consistent US companies as protection against European and Latin American investments, which are currently much more volatile. None of this takes into account whether or not customers are likely to switch to services like Netflix or satellite TV from DIRECTV. Even with declining subscriptions, other cable services like Charter Communications are up this year as well.
Investor confidence is not enough to keep cable companies going, however. Constant innovation is necessary as many customers are cutting the cord and going toward watching more programming online. Young people especially are watching more and more programming on the internet, legally and illegally, and this is the cable companies’ current and future customer base slowly dwindling. Time Warner Cable, Comcast and Charter are making up for that somehow by also being internet service providers, and thus providing the service that people are looking for beyond just cable television. That diversification, and bundling of services, is key to the future success of cable companies, and their continued health in the market. Their current health, however, is measured in stability; these are not businesses that are going to grow exponentially, but there is little risk in the investment, and for right now for investors that’s enough.