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INDUSTRY SEGMENT PERFORMANCE

The number of subscriptions to video services increased by 5.9 percent in 1998, reaching 78.3 million from 73.9 million in 1997.
The subscription video services operator market consists of cable, direct broadcast satellite (DBS), multipoint multichannel distribution service (MMDS) or wireless cable, C-band satellite, satellite master antenna TV (SMATV), and services provided by local telephone companies.

Accounting for 83.5 percent of subscriptions to video services, cable is still responsible for a significant share of the industry's growth. In 1998, there were 65.4 million households subscribing to cable service. In spite of heightened competition from DBS, which has characterized the industry for the past four years, the cable universe has continued to grow, adding net 1.2 million households in 1998. By comparison, DBS subscriptions expanded by a net 2.2 million households.

Subscription video services spending will grow at a projected 11.3 percent compound annual rate over the 1998-2003 period, comparable to the 11.6 percent annual growth of the last five years.
Source:Veronis, Suhler & Associates Communications Industry Report

1/04/99

Revenues of publicly reporting subscription video services companies rose 17.7% to $34.4 billion in 1997, the third consecutive year of double-digit growth.
SVS operators accounted for $27.9 billion of the total, while cable and pay-per-view networks accounted for $6.4 billion. Assets rose 11.6% in 1997 to $114.3 billion, more than twice the $49.3 billion total of 1993.

Operating margins rebounded in 1997, after declining between 1993-1996. Operating income rose .5 points to 9.4%, while operating cash flow rose 1.7 points to 36.6%.

Growth for cable operators was mainly generated by existing subscribers' increased spending on a greater array of basic, premium, and pay-per-view offerings. In 1997, cable operators reaped the benefits of earlier system upgrades which allowed them to expand channel offerings.

DBS subscribership increased by 2.1 million in 1997, three times cable's gain, and revenues for DBS operators rose 83.0% to $2.8 billion -- more than 10 times 1993's total.

For basic cable networks, the higher subscribership count boosted license fees while ratings and advertising continued to soar. Revenues of publicly reporting cable network companies rose by 12.9% in 1997, the fourth consecutive double-digit increase.
Source:Veronis, Suhler & Associates Communications Industry Report

10/26/98

Total Spending on Subscription Video Services to Continue Double-Digit Growth through 2002
Total Subscription Video Services spending, including advertising, subscriber and pay-per-view, is forecasted to rise to $66.4 billion in 2002 from $38.5 billion in 1997, an 11.6% compound annual growth rate.

Total advertising spending will rise to $16.5 billion in 2002, up from $7.9 billion in 1997, a 15.9% annual growth rate for the five-year period. Spending by subscribers on basic services, premium services, and pay-per-view will climb 10.3% annually over the 5-year period, reaching $50 billion in 2002 from $30.6 billion in 1997.

The rising ratings for basic cable programming, as well as growing channel capacity on many cable systems, will help offset competition from DBS, which is not expected to offer significant local programming. While the number of DBS subscriptions is projected to rise at a compound annual rate of 8.5% from 1997-2002, compared to a 1.7% compound annual increase in the number of cable subscriptions, by 2002 68.3% of households will be cable subscribers, compared to just 7.8% as DBS households.

Wireless cable will not attract sufficient capital to become a major competitor. Competition from DBS will lead to a reduction in C-band subscriptions.
Source: Veronis, Suhler & Associates Communications Industry Forecast

10/01/98

Subscription Video Services: There were no major cable system transactions in 1997 to match the large deals of 1996 (including US West's $10.8 billion acquisition of Continental Cablevision and Time Warner's purchase of Cablevision Industries for $2.7 billion)
However, there were more than six transactions valued above $500 million. In the wake of 1996's activity, the total value of transactions in this segment fell to $14.5 billion, from $27.8 billion.

Clustering continued to be an important driver of cable system activity in 1997. TCI Communications and Time Warner divested isolated systems in order to improve their cluster focus and raise capital to finance cable system upgrades. In the two largest transactions of the year, Time Warner sold systems in Florida, North Carolina and New York to Time Warner Entertainment/Advance Newhouse Partnership for $1.3 billion, and TCI Communications sold systems in New York and New Jersey to Cablevision Systems for $1.2 billion.

Continued ratings improvement, double-digit advertising growth, and enhanced carriage fees are making cable networks increasingly attractive. Transactions involving cable networks totaled $11.2 billion in 1997 and $8.4 billion in 1996 -- compared with $7.8 billion for the entire 1993-95 period.
Source: Veronis, Suhler & Associates Communications Industry Transactions Report


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