Cable networks are withstanding macroeconomic weakness through a mixture of domestic advertisement sales, subscription fees and international expansion in countries with low penetration rates, leading Analyst David C. Joyce, CFA, from Miller Tabak + Co., LLC, to rate several of them “buy.”
“[Cable networks] have a dual revenue stream of monthly affiliate fees that have contractual increases and they also get advertising, and it is their national advertising category that is holding up well and is still growing in the low double-digit kind of range,” Joyce said.
Joyce says Discovery Communications (DISCA) benefits from the international shift toward pay-TV and digital market. DISCA is the most distributed in the globe, with 180 countries having at least one of the company’s networks, and Joyce sees good upside from affiliate fees and international advertising.
“[Discovery Communications gets] about a third of their revenue internationally, but with more of the world upgrading to pay TV and from analog to digital, I think there is more opportunity for Discovery to extend its cable network brands around the globe. They are already the most distributed,” Joyce said.