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Retail Tales of Success

4/25/2004 8:00 PM Eastern

Mickey Valletta keeps a stock of about 25 Scientific-Atlana Inc. HDTV set-tops on the shelves of his Town TV Audio & Appliances store in Schenectady, N.Y., where he tells shoppers that the best way to get programming for their pricey new TVs is to get a high-definition programming package from Time Warner Cable, the local operator.

Not only does Valletta pitch Time Warner over DirecTV Inc., his employees also install the set-tops after they deliver the new HD sets, saving Time Warner Cable’s Albany, N.Y., division the cost of a truck roll.

Last month, Valletta says Time Warner sent him an $800 check for signing up about 30 new HDTV customers.

In San Antonio, Texas, Bjorn Dybdahl, the owner of Bjorn’s Audio Video, stars in commercials for the local Time Warner system in which he explains the intricacies of HDTV. At the end of the spots, viewers are directed to his store to see how HDTV works in person.

“There’s no money changing hands,” Dybdahl says of his relationship with the San Antonio system. “We’re scratching each other’s back, and helping each other move forward.”

Valletta and Dybdahl are at the forefront of a new retail strategy that Time Warner and other MSOs such as Charter Communications Inc. are pursuing in order to drive sales of HDTV packages.

ONE-STOP SHOPPING

Cable executives say one of the drivers of their expansion into retail is a desire to sell consumers HDTV programming packages at the time they purchase a television.

Time Warner Cable San Antonio vice president of marketing and product development Jeff Henry says his arrangement with Bjorn’s Audio Video is part of a broader strategy to drive HDTV sales.

The San Antonio system also markets HDTV through four mall kiosks that it began building last summer, as well as through 10 Time Warner “entertainment centers” located throughout San Antonio. At the latter, subscribers can also pay their bills or check out the company’s Road Runner high-speed data service.

The results: Henry says the 350,000-subscriber San Antonio system now counts 15,000 HDTV customers, and that it’s signing up about 3,000 new HDTV subscribers monthly.

“As a single product, it reminds me of back in the early days before pay TV, when you couldn’t install them fast enough,” Henry says.

While Dybdahl’s employees don’t install the HDTV set-tops, he says he’s talking to Time Warner about taking that step. If the retailer and Time Warner pursue that model, which Valletta uses in Albany, Dybdahl says he expects that he would be compensated for installing the set-tops.

Time Warner Cable’s New York City division is already following Albany’s lead. High-end home-theater retailer Harvey Electronics has agreed to display Time Warner HDTV set-tops. And Time Warner is currently training Harvey installers, with the expectation that they’ll start installing HDTV set-tops in about a month’s time, according Time Warner Cable New York director of special markets Victor Cruz.

The New York division also recently opened a 50-by-30-foot kiosk at Queens Center Mall, called the “Time Warner Cable Living Room,” which contains HDTV sets, Road Runner displays and cell phones that shoppers can use for free.

Cruz says the second phase of the strategy at the mall is scheduled to kick off in October, when Time Warner will debut a store with 4,000 square feet, which will contain HDTV displays and a payment center. Cruz says Time Warner is modeling the location after its payment center on 23rd Street in Manhattan, which draws heavy traffic.

A NATIONAL STRATEGY

While cutting deals with local retailers to market and install HDTV set-tops is a first step, some cable executives say that forming similar relationships with national retailers is more difficult.

Time Warner Cable recently announced an agreement with Circuit City to market Road Runner in stores nationwide, and later this year, the MSO expects to expand the agreement to allow it to market HDTV and other digital video services in Circuit City stores.

But Time Warner Cable vice president of sales channel development Charles Haugabrook says the logistics involved in pulling off what Time Warner is doing with the small retailers in San Antonio, New York and Albany would be difficult to execute with a retailer the size of Circuit City.

Time Warner isn’t the only MSO that has cut deals to market HDTV through local retailers. Charter Communication Inc.’s Fort Worth, Texas, and St. Louis, Mo., systems have deals with local retailers that display HDTV set-tops on their shelves.

“It’s been a good experience,” says Charter director of retail and e-commerce marketing Mark Guberman. “It basically gives the retailer a more end-to-end relationship with their customer, which is what they’re looking for. And it gives the customer a better experience.”

Guberman also notes that the model allows consumers to order HDTV programming while they’re in a store, avoiding a phone call to Charter.

NASCAR, BASKETBALL

Charter, which sponsors a NASCAR team, is also using a 48-foot mobile trailer to market HDTV at racetracks located near Charter cable systems. The “Charter Racing Pavilion” contains both high-def and standard definition televisions, so people attending the races can see the difference in picture quality.

While some cable MSOs are pursuing separate retail HDTV marketing strategies, they’re also teaming up as an industry to market HDTV.

In March, eight major MSOs cut a deal with Samsung Electronics America Inc. to market HDTV in a campaign tied to CBS’s coverage of the NCAA Men’s Basketball Tournament.

Samsung and the MSOs spent more than $10 million on ads marketing Samsung HDTVs and cable-programming packages, with the operators offering $100 in coupons to consumers who bought any Samsung HDTV.

“It’s a historic marketing tactic for the cable industry,” Guberman says. “It’s the first time that we’ve essentially created a national footprint, and worked with an international [consumer electronics] manufacturer.”

No national retailers were involved with the Samsung campaign, but executives say retailers such as Circuit City and Best Buy may be brought in on future marketing campaigns.

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