1. License to Steal

Cable operators could gradually write off the cost of their systems over a number of years, allowing them to reduce the leftover profits they reported as earnings and thereby sheltering a healthy flow of cash from taxation. And once they had written off most of the value of a cable system’s assets, they could sell it to a new owner, who could begin the tax-eluding depreciation cycle all over again.
Cable TV systems, to every new owner’s delight, generated bundles of cash from installation charges, $100 to $300 a customer in the 1970s, and monthly services fees of $5 to $20. Most of the money was plowed back into the companies, with hardly anything going to pay dividends to shareholders. This high cash flow could service an immense amount of debt, which was used to buy more systems. So the actual value of the acquired systems was always growing. Moreover, the companies paid hardly any taxes because of the high depreciation on the equipment. The average cable system enjoyed a profit margin of 57 percent, far fatter than most businesses.