Cable Bahamas has blamed the arrival of "pirated and security compromised set top boxes" in the Bahamian market for its flat cable television revenues in fiscal 2005, but believes the introduction of its digital services will combat this in 2006.
The BISX-listed company's annual report said piracy had caused it "significant revenue losses" in 2005, with premium cable television revenue showing "virtually no growth" over 2004, and pay-per-view revenues off by more than 26 per cent.
"These results are believed to be primarily the product of the introduction of pirated and security compromised set top boxes into the local community," Cable Bahamas said.
"These boxes have the ability to decipher our entire encrypted analogue premium channel offering, providing the illegal users free access to the full premium tier programmes without obtaining a valid subscription from the company.
"As a result of this proliferation in illegal activity, the company experienced significant revenue losses."
Yet through the arrival of digital set top boxes and an all-digital set of service offerings, Cable Bahamas said it expected to "fully eradicate" piracy by phasing out the old analogue premium tiers.
As a result, the company said premium and pay-per-view revenues were set to rebound in 2006.
Revenues from cable television account for 59 per cent of Cable Bahamas' total revenues. The cable business generated $33.4 million in revenue for the company in fiscal 2005, a rise of 6.9 per cent over 2004.
Subscribers increased by 6.8 per cent in 2005 to 70,255, growth that Cable Bahamas said stemmed from the launch of its Oceans Digital TV, satellite dish owners converting to cable, and the expansion of its network to new homes.
Among the new subdivisions that provided Cable Bahamas with an increased customer base were Jacaranda, Coral Vista, Millennium Gardens and John Clive Pugh.
However, Brendan Paddick, Cable Bahamas chairman, described as "unprecedented in the cable television industry" the Government's failure to approve an increase in the basic cable television rate of $30 per month since the service was first launched in 1995.
Mr Paddick said the company's third application for a rate increase was turned down by the Television Regulatory Authority in June 2005, forcing Cable Bahamas to examine its costs.
Mr Paddick wrote: "Management quickly enacted its contingency plan to reduce operational costs by repackaging its basic television line up.
"Going forward, management will continually review and control its costs associated with the basic television offering, while continuing its appeal for reasonable rate adjustments."
Cable television programming costs rose by 25 per cent in fiscal 2005, increasing from $4.7 million in 2004 to $5.9 million, something the company said was the largest cost component in providing cable television services.
Cable television revenues rose by only 7 per cent, and Cable Bahamas added: "Since the company's inception, programming costs and other operational costs required, in providing cable television services have continued to rise at a greater rate than the associated revenues.
"This has caused the profit margins derived from the cable television division to decline over the past years. In 2005, these margins dropped further to 40 per cent from 42 per cent.
"Current trends in the industry suggest that programming costs will continue to rise significantly, and thus the company must apply even greater efforts to maintain profitability.
On a brighter note, Mr Paddick said that since Cable Bahamas launched Oceans Digital TV in the 2005 fourth quarter, some 5,500 customers had subscribed to it in the first nine weeks. Some 7,000 digital set top boxes are deployed in the Bahamas.
Cable Bahamas said its total revenues had increased by $31.2 million or 120 per cent since 2000, rising from $25.9 million to $57.1 million.
The company's Internet business had accounted for $15 million or 48 per cent of that growth; with cable television contributing $8.8 million or 28 per cent; and data some $7.4 million or 24 per cent. Cable Bahamas said that, now, cable television accounted for 59 per cent of revenues; Internet some 28 per cent; and data another 13 per cent.
NEIL HARTNELL, The Tribune
