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CABLE WORLD STAFF
The cable industry took a breather in Chicago last week. After a year of $160 billion worth of cable systems sales, last week's NCTA national show seemed to crawl along at analog speed, which was probably necessary given where cable's been in the past 12 months.
The stocks have been taking a hit, although few people seemed terribly concerned. The consumer press was focusing on the Portland, Ore., court case on broadband access that went against AT&T and cable. But there again, few people were terribly concerned.
The spaciousness of McCormick Place made NCTA feel smaller than the announced attendance of 28,000 plus, a slight, perhaps consolidation-related drop from past years.
There were plenty of new hardware and software applications on the show floor, from WebTV, Worldgate and ICTV, to Intertainer, Cisco Systems, 3Com and Lucent Technologies.
Programmers weren't left out either. Geraldine Laybourne and Pat Mitchell provided more details for their respective new women's networks. MBC Corp., backed by celebrities Marlon Jackson, Cecil Fielder and Evander Holyfield, vied with BET for the attention of operators for a new family/lifestyle network aimed at African-Americans.
By day, NCTA took on a more corporate feel. Michael Armstrong made history by being AT&T's first chairman to keynote the convention. A second billionaire newcomer, Paul Allen, anchored a second-day opening session.
By night, many of cable's historical stars paid homage to Amos Hostetter, Gerald Levin, John Malone and Ted Turner, all of whom were inducted into the National Cable Television Center and Museum's Hall of Fame. It's not quite fair to say the torch has been passed completely to a different set of cable leaders. Turner and Levin are still running Time Warner and Malone and Hostetter are on AT&T's board.
But life is changing within the cable industry.
It's probably both inevitable and necessary, if cable's going to live up to the promise inherent in today's stock prices.
The view from Wall Street was rosy, with notes of caution on the speed of delivering new revenue. "We want to see revenue growth," said Morgan Stanley's Rich Bilotti. "Launching in two years isn't good enough."
Bilotti is forecasting cable will hit a 12% to 13% sustainable cash flow growth over the next five years, based on the rollout of new services. If cable only hits 10% annual cash flow growth, he said multiples that fall into the 17 times range today could contract 25%.
At the same time, current multiples could jump even further with new revenue streams like VOD. If HBO launches an on demand service, Bilotti said "there would be blood in the streets" as consumers fight over digital set-tops. "That's a devastating product. It wipes out video stores."
Cable's ability to deploy digital set-tops, then migrate up to higher level interactive boxes that feature more services is another killer application, Bilotti said.
DBS companies are essentially floundering around with TiVo and Replay Networks experiments, he said, which do nothing more than simulate interactivity.
"If they win, it's because cable lets them win," he concluded.
Such was the good vibe feeling at NCTA last week.
There were plenty of market success stories on modem rollouts and telephony services, and plenty of solid numbers on digital set-top growth, which seems to embolden more programmers to dust off old business plans.
And there were plenty of bright-eyed application developers looking to impress MSOs and folks from the major operating systems who will run the souped-up digital set-top boxes a year from now.
Cable may have needed a low-key show after months of high- profile news. Now the blocking and tackling begins, market by market - rolling out new services, tweaking the launches, executing corporate plans, and delivering the goods. Because America is waiting.
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