Marketing

Time Warner Cable Widens Rollout of Low-Priced Packages

9/26/2011 12:01 AM Eastern

Less than a year after testing a low-cost
video tier in New York and Ohio, Time Warner Cable will
expand the rollout of its TV Essentials package to other
markets across the country, chief operating officer Rob
Marcus said last week.

Marcus, speaking at the Goldman
Sachs Communacopia conference in
New York Sept. 21, said that the rollout
will initially be concentrated in the East,
but that it would expand to the West
Coast in the future.

Time Warner Cable began testing
TV Essentials last year, offering a package
of more than 40 channels including
the four broadcast networks, AMC,
Bravo, CNN, HGTV, Lifetime, USA Network
and MTV for about $40 per month
in New York in November. In December,
the company offered a similar package
in Northeastern Ohio for $30 per month,
rising to $50 after 12 months. Marcus
did not reveal how the package will be
priced once the rollout expands.

PRICIER NETS OMITTED

More-expensive services such as ESPN
were not included in the package, although
the less costly ESPNews was
available.

Marcus did not reveal how many takers
Time Warner Cable had for the package.

“We’ve been challenging ourselves to
design an offering that might be more
attractive and affordable to those customers
who might not be able to handle
the full packages. The numbers are
pretty small, but the results are sufficient enough that we’re going to roll it
out more broadly,” he said.

The lower-priced package was targeted at price-conscious
customers and those adversely affected by the sluggish economy
and high unemployment. Sanford Bernstein cable and
satellite analyst Craig Moffett has warned for years that the
buying power of the middle class is dwindling
considerably. In a recent report, Moffett
noted that after paying for food, shelter
health care and transportation, the bottom
40% of households in the U.S. have exhausted
their disposable income.

“There is nothing left
for clothing … for debt service
… for cable … or for
phone,” Moffett wrote in a
report earlier this month.

Miller Tabak media
analyst David Joyce was
encouraged by the expansion
of TV Essentials, adding
that it could help the
MSO retain some of the
single product video customers
it had been losing
to lower-cost services.

“This should continue
to help stem the video
losses, and help margins
(as there would be a greater
subscriber base over
which they can allocate
SG&A expenses),” Joyce
wrote.

Time Warner Cable
lost 130,000 basic video
subscribers in the seasonally weak second
quarter and has warned that losses would
be larger in the third quarter, but not as bad
as in the prior year.

Marcus said that subscriber performance
was better in August and in September than
in July.

“We’re losing fewer video subscribers
than we did a year ago, and we’re gaining
more high-speed data subs than we did a
year ago,” Marcus said. “Voice continues to
be somewhat softer than last year.”

Earlier in the week, Comcast chief financial officer Michael
Angelakis said he, too, was encouraged by an uptick
in subscriber growth in August and September. Angelakis,
who spoke at the Goldman conference last Tuesday, said traditionally
cable companies recoup some
second quarter customer losses in the
third quarter as students return to school
and vacationers return to their primary
residences.

“We are very focused on back to
school,” Angelakis said. “We have a level
of confidence in our business. We think
we are continuing to execute well across
all categories and we’ll see where the third
quarter plays out, but we feel pretty good
about how we’re doing.”

STAYING IN TERRITORY

Both Marcus and Angelakis said their respective
companies would not attempt to
provide video service outside their territory
via the Internet, instead concentrating
on increasing connections to its physical
network.

Marcus said that TWC, which began
providing free Slingboxes to subscribers
to its Wideband 50 Mbps data service in
August, allowing them to access programming
remotely from their home set-tops,
did look into out-of-market video sales but
decided against it.

“I wouldn’t dismiss it out of hand, but
we feel our real competitive advantage
over the long term is our physical infrastructure,”
Marcus said.

Angelakis said last Tuesday that he hasn’t found a model
where out of market Internet video would work.

“Our key asset is the network we have,” Angelakis said.

“The best return for us is to increase connections to that
network.”

ESSENTIAL TV

Time Warner Cable’s TV
Essentials package offers
about 40 channels for $40
per month. A selection of
what’s included:

AMC

Bravo

CNN

Discovery Channel

Disney Channel

ESPNews

FX

HGTV

Lifetime

MTV

Nickelodeon

TBS

USA Network

SOURCE: Time Warner Cable

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