(Pay-TV Stock article updated with Cablevision's Rainbow spin-off plans, analyst commentary and stock price information.)



) -- As the media landscape shifts to accommodate the way consumers access video content, cable and pay-TV companies are scrambling to offer on demand services to retain subscribers.

The fear that "cord cutters" are canceling their pay-TV services to watch television via online video is menacing the cable industry as on-demand viewing services such Hulu and


(NFLX) - Get Report

gain momentum.

Indeed, the second quarter of 2010 marked the first time in pay-TV history that the industry saw a loss in subscribers. The number of pay-TV subscriptions dropped 216,000 in the second quarter, followed by third-quarter declines of 119,000. The Convergence Consulting Group projects that by the fourth quarter of 2011, the number of cord cutters will reach 1.6 million.

Many cable providers are chalking up these losses to a cyclical trend in the overall market, rather than declaring it a secular issue -- while some CEOs completely deny any connection between the two. Still, most cable companies are offering what the industry has dubbed "TV Everywhere" in efforts to prevent customer migration.


(TIVO) - Get Report

CEO Tom Rogers, for his part, believes that cable companies should deliver on-demand content to combat the possibility that cord cutters are leaving the pay-TV ecosystem. "It's all about giving people what they want, when they want it," Rogers said in a presentation at the 38th annual UBS media conference in December.

Analyst Bryan Kraft with Evercore Partners said that while


(CMCSA) - Get Report

has been performing "in line with the market," it has been gaining on its cable contenders for the past year. Comcast stock is up more than 26% in the past year, trailing

Time Warner Cable





, which are up 58% and 33%, respectively.

"Time Warner Cable and Cablevision have been the real strong performers and Comcast is due to catch up," Kraft said.

Analyst Mike McCormack of Nomura Research recently initiated coverage on the cable and satellite industry with a neutral rating, with a positive bias toward cable stocks.

While the firm rates the sector as neutral, McCormack initiated coverage of Comcast, Time Warner Cable and Cablevision with a buy rating, based on their ability to implement usage-based pricing in comparison to its pay-TV peers,

Dish Network

(DISH) - Get Report





He initiated coverage of Dish and DirecTV with a neutral rating as he believes the satellite operators are "increasingly ill-suited to compete in the video business."

"We believe competition will increase from already high levels, with video-only product offerings defined by price competition," McCormack said in his Dec. 13 report.

As the major cable and satellite providers jump to offer their consumers more flexible viewing options, some companies have been more successful in holding onto subscribers than others. Here then is a roundup of the winners and losers in the pay-TV sector in 2010.



(TIVO) - Get Report

Year-to-Date Stock Performance:


In 2010, TiVo was one of the worst-performing stocks in cable TV sector. Its overall share price has fallen more than 20% over the past year and is trading around $8.15, which is at the low end of its 52-week share price range of $6.92 to $18.93.

On Nov. 23, TiVo reported a third-quarter loss of $20.6 million, or 18 cents per diluted share, compared with a loss of $6.4 million, or 6 cents per diluted share, in the same period a year earlier. Losses were slightly wider than analysts' consensus expectation for a loss of 17 cents a share.

TiVo's total number of cumulative subscriptions in the quarter dropped 17% to 2.3 million from 2.7 million in 2009 and its operating expense spiked 32% to $44.2 million from $33.5 million as it looked to expand overseas.

"We believe that the work that we are doing and the distribution deals we have in place will become apparent in our financials over time and will change the trajectory of our subscription base in a meaningful way in the relative near term," CEO Tom Rogers said.

Management said it was looking forward to closing deals with

Virgin Media


in the U.K., ONO in Spain and Canal Digital in Scandinavia.

>>Tivo, Virgin Media Partner on U.K. Service

"All told, these two exclusive deals with Virgin and Ono, along with Canal Digital, are expected to make the TiVo experience available to up to 7 million households in Europe over the next several years," Rogers said, "and will help bolster our position as the clear leader in the fastest growing segment of pay-TV."

The company has been known to rely on its digital video recorder service, which it introduced in 1999. Media company analyst Barton Crockett of Lazard Capital recently called into question the long-term value of the DVR at a time when online video usage is becoming increasingly common.

For the fourth quarter, management expects a net loss between $32 million and $34 million. In addition, the company anticipates that the final quarter of its fiscal 2011 will be impacted by about $10 million in costs due to holiday hardware pricing.

TiVo will release its fourth quarter financial information after its fiscal year ends on January 31, 2011. Wall Street expects the company to report a loss of 28 cents a share.

Dish Network

Dish Network

(DISH) - Get Report

Year-to-Date Stock Performance:


Dish Network's 2010 performance failed to impress investors, as the stock fell more than 11%. Dish is trading at the low end of its 52-week price range around $18.80.

Analyst McCormack of Nomura Research initiated coverage on Dish Network in late December with a neutral rating and an $18 price target as he believes the company "lacks an identifiable catalyst to build a credible recommendation to buy the shares."

"We believe the debate on Dish shares will be largely defined by the company's success in regaining share of video subscribers and the likelihood of capital returns," McCormack said in his report.

While Dish's share price is down over the past year, it is actually one of the few TV companies that

saw a gain in subscriber revenue in the third quarter

, despite a loss in customers.

While the U.S. satellite TV provider lost approximately 29,000 net subscribers in the third quarter, compared to a net gain of 241,000 one year earlier, the higher average monthly revenue per subscriber brought up the revenue.

Management says that ARPU will continue to increase as a result of higher hardware-related fees, which means higher subscription prices for customers.

The company reported a triple-digit gain in third-quarter earnings to $245 million, or 55 cents per diluted share, compared with earnings of $80.6 million, or 18 cents per diluted share, in the same period a year ago. Earnings came in well ahead of analyst estimates of 42 cents.

Revenue rose 10.9% to $3.21 billion from $2.89 billion during the quarter as subscriber-related revenue was up 11.3% to $3.19 billion from $2.86 billion.

Analysts' consensus call is for earnings of 52 cents per share for the year, down from earnings of 40 cents a share a year ago.




Year-to-Date Stock Performance:


DirecTV's stock has gained more than 20% over the past year as the

company's bullish outlook

is likely driving investors' confidence. CEO Mike White expects the satellite-TV provider to add a net 200,000 U.S. subscribers in the fourth quarter, despite the industry's concern regarding cord cutters.

"We're continuing to see momentum," White said at an investor event in November. "DirecTV is well positioned for continued success."

White predicts that DirecTV will report earnings of about $30 billion, or $5 per share, in 2013, which would be significantly higher than its most recent quarterly report in which it saw

earnings of $479, or 55 cents a share

. Earnings were driven by strong subscriber growth in both its U.S. and Latin American regions.

The company ended the third quarter with a total of 18.9 million U.S. subscribers, up 2.7% from 18.4 million subscribers at the end of the third quarter in 2009. It also added 206,000 net subscribers in Latin America in the third quarter, bringing the cumulative number of subscribers in the region to 5.4 million.

Management expects its subscriber base to reach 30 million by 2013, about 10 million higher than its most recent subscriber mark.

Analysts expect the company's fourth quarter earnings to come in at 64 cents a share.



(CMCSA) - Get Report

Year-to-Date Stock Performance:


Comcast's solid performance over the past year helped boost the stock to a new 52-week high this week, after reporting

an 8.2% drop in third-quarter earnings

to $867 million, or 31 cents a share in November. Its total revenue rose 7.1% to $5.91 billion from $5.52 billion.

>> Comcast, Cablevision Hit 52-Week Highs

The company reported a 4% increase in total customers to 64.8 million from 67.4 million, which is more subscribers than most of its cable-sector peers, and greater than the number Time Warner Cable and Cablevision subscribers combined.

A 3.5% decrease in video subscribers was offset by 13.2% growth in voice customers and a 6.5% increase in high-speed Internet customers. The monthly average revenue per video customer was up 10.4% to $129.75.

Video: Comcast Is A Sold, Reliable Stock

Total earnings were hampered by $27 million in transaction costs related to the deal with NBC Universal. In December 2009,

General Electric

(GE) - Get Report

announced a joint venture agreement with Comcast. Through the deal, Comcast will own 51% of NBCU and 49% would be owned by GE, but managed by Comcast.

Analyst Craig Moffett of Bernstein Research

recently upgraded the cable company to a buy rating

and raised his target price to $26 from $20 in anticipation of the company's NBCU acquisition, which he expects to be finalized in 2011.

"With deal closure imminent for 2011, we believe it is time for investors to start thinking of Comcast as the combined Comcast-NBCU entity," Moffett said in his Dec. 14 research report. "On that basis it is attractive on valuation."

While the regulatory conditions of the merger will likely make NBCU "less valuable" within Comcast, Moffett expects the risks to have a minor impact on the entire company as the content business will only comprise about 9% of its earnings before interest, taxes, depreciation and amortization.

Moffett says that "Comcast's capital allocation plans should be far more transparent" once the deal is complete. He expects the company to return cash to stockholders by aggressively repurchasing shares.

He added that Comcast has predictably lagged in the cable sector on fears that the merger might "translate into dead money" and uncertainty about how long this "regulatory limbo" will last.

Wall Street forecasts that Comcast will report earnings of 32 cents a share in the fourth quarter.




Year-to-Date Stock Performance:


Cablevision is up more than 34% in the year and recently reached a new 52-week high share price.

The company reported that its

third-quarter earnings increased 13.3%

to $112.1 million, or 37 cents per share, from $98.9 million, or 33 cents per share, in the same period one year earlier.

The cable company's revenue was up 5.6% to $1.81 billion from $1.71 billion as its the total number of subscribers grew to 10.7 million from 10.5 million.

Cablevision recently upped the number of potential customers by completing its $1.37 billion acquisition of

Bresnan Communications

, a small cable and telecom service provider in the Midwest.

Through the transaction, Cablevision added about 297,000 basic cable television subscribers in Montana, Wyoming, Colorado and Utah and 629,000 more potential subscribers.

After the company reported double-digit revenue growth at its Rainbow Media segment, management said it was

exploring a potential spin-off of its Rainbow business

as a "tax-free pro rata distribution" to stockholders.

Rainbow, which consists of AMC, WE TV, Sundance Channel, News 12, IFC and Rainbow networks, saw a 12% increase in its third-quarter revenue to $291.4 million from $260.1. Its advertising revenue rose 12.9% and the number of viewing subscribers increased 2.8% at AMC, 2.5% at IFC and 2.8% at WE TV.

On Dec. 17,

Cablevision's board of directors authorized management to move ahead with its spinoff plans

. The company expects the spinoff to be completed by mid-year 2011. It will include the creation of new debt, including a portion to be used to repay $1.25 billion in existing Cablevision debt.

In a Nov. 18 note, analyst Craig Moffett said Rainbow is "likely to command a far higher valuation as an independent entity than it currently does embedded in Cablevision."

Analyst James Ratcliffe of Barclays Capital estimates that spinning Rainbow off into a standalone entity could add somewhere between $1 and $3 a share in value to Cablevision's stock.

McCormack of Nomura sees the leveraged Rainbow spinoff as a positive for shareholders and predicts that a lack of

programming disputes

will benefit the company after management secured several long-term deals through 2011. He recently initiated coverage on Cablevision with a buy rating and a year-end 2011 price target of $40.

McCormack projects a 5% growth in consolidated earnings before interest, taxes, depreciation, and amortization in 2011 and 2012 which translates to about 30% growth in free cash flow per share over the same time period.

Analysts are expecting Cablevision will see fourth-quarter earnings of 41 cents per share.

Time Warner Cable

Time Warner Cable


Year-to-Date Stock Performance:


Time Warner Cable is up almost 57% over the past year and recently reported a

34.3% increase in earnings in the third quarter

to $360 million, or $1 per share, from $268 million, or 76 cents a share.

The stock has been trading at the high end of its 52-week price range of $41 to $66.77, and has seen the largest increase in share price of any company in the cable industry.

The company lost 63,000 total customers in the third quarter, bringing its total revenue generating units to 35.7 million. It still increased its subscriber revenue by 4.5% to $4.5 billion from $4.32 billion, due to a 3.5% increase in residential subscription revenues and a 21.6% increase in commercial subscription revenues, which translates to higher pricing for customers.

In a presentation at the 38th annual UBS media conference in December, CEO Glenn Britt said that there's "no meaningful evidence" that consumers are canceling their cable service to watch television via online video, even after the company reported a

loss of 155,000 video subscribers in the third quarter

, compared with 64,000 one year earlier.

"The fact is, the content isn't that great," Britt said, referring to free, online video offerings. "If you want to watch old movies, or shows that aired several days ago it's fine. But if you want to watch seven or eight hours of television a day, which is how most Americans watch TV,

online video isn't enough."

Analysts expect Time Warner Cable's fourth-quarter earnings to remain flat at $1 per share.

-- Written by Theresa McCabe in Boston.

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