Recurring Revenue

It hits your credit card relentlessly. Like rain from a storm, a la Noah.

Your cable bill? Yeah, that's recurring revenue. Whether they give good service or meh service, you're gonna continue paying your 100 bucks and change a month, because you can't live without internet connectivity, you can't live without ESPN, and you can't live without, um, you know...art films.

On the seller's side, think: Comcast. They have steady, predictably reliable recurring revenues from you. Each home in America that subscribes to cable pays about $1,200 a year or more for the privilege.

Why does it matter that the revs recur? Well, if you have a business that is steady and stable, in good economic times and bad, you are likely able to borrow money and reliably pay it back. You can use that borrowed bank to then buy other cable systems, to invest in content, to build non-U.S. assets, and so on. And, in fact, that's what Comcast has done over half a century. The cable business, being so highly predictable, has been one of the largest borrowers in history, and equity investors have loved this fact. Instead of being diluted as the company wanted to grow, selling equity in itself to fund acquisitions, the company instead took on debt, bought competitors, paid off the debt, and the share count remained flat. Good work if you can get it.

See: Leveraged Buyout. See: Operating Leverage.