Insight Communications CEO Michael Willner looks ahead at running a small, or at least smaller, cable operator and sees the glass as half full.
Half full is right, as Insight will soon, if all goes as expected, be about half its current size of 1.36 million subscribers.
The other half (systems in Illinois and Indiana) are shifting over to Comcast later this year. Comcast exercised its option to sever the Insight Midwest joint venture in that way.
But there are reasons Willner could be seeing the glass as half empty, instead.
Insight will lose more than just top-10 cable operator status. It’s losing the buying clout that comes with being aligned with 24-million-subscriber Comcast. Basically, it’s dropping into National Cable Television Cooperative status.
That’s meant renegotiating programming contracts – talks that are in the late stages and could, Willner says, lead to channel drops.
Channel drops can mean subscriber losses. And Insight is rightly proud that it’s growing subscribers. Its third quarter report will include a gain of 21,100 basic customers (on a base of 1.36 million) at a time when Comcast just reported a quarterly decline of about 65,000 basic customers.
Comcast’s decline spooked investors worried about video competition, and depressed cable stocks. (Some analysts called the sell-off an over-reaction, as telco video numbers are rising but the third quarter actually saw soft sales of telco DSL-satellite-TV bundles.)
Insight tries to avoid “distractions” that could lead to subscriber drops, Willner said. And never acts like an arrogant incumbent, he said.
That’s one reason Insight recently added Big Ten Network to the systems it’s retaining. Calls from fans wanting the network spiked both before and after it launched and before Insight added it. (Another reason is BTN is part of the Fox Cable empire, with which Insight is negotiating.)
“You just don’t want to let things interfere with a well-oiled, humming machine,” Willner said a couple of different ways during an interview with him and COO Dinni Jain last Tuesday.
Jain said Willner and he are planning to run Insight for the next three, four, five years, “whatever it takes,” at its reduced size.
That’s even though Insight this past spring sought offers for “Insight Systems Group” – the 639,000 plus customers in Kentucky; Evansville, Ind.; and Columbus, Ohio, that stay in the fold.
“We were reviewing our strategic alternatives,” Willner said, disputing September reports that described it as an auction that was halted.
“We will continue to run the company, first and foremost,” Willner said. “And secondarily [will] consider strategic alternatives that may make some sense for our equity holders.”
With three decades in cable, Willner knows there are certain times – like now – that banks pull back from lending money for big acquisitions.
That gives him reason to believe Insight can sell out at a price Carlyle will accept a year or two or three from now.
More justification for a half-full view.
In the meantime, Willner last week was dealing a leadership card from a position of strength.
Insight wants people to know the subscriber gains and other positive results – including 14% revenue growth and 15% operating cash flow growth in the third quarter compared with the same period in 2006 – come from its “challenger” mentality and smart “blocking and tackling.”
Jain said with pride that top managers tells division chiefs to control the things that they can manage – such as new connections and disconnections, responsiveness to customer calls, recovering cash from non-paying customers – and not worry about operating cash flow, which is affected by corporate overhead decisions.
“We’re getting very close to the budget-less company,” Jain added. “In the districts, the amount of interaction and time they spend on the budget is next to nothing. Whereas it used to shut us down for three months.”
Keeping distractions to a minimum.
Willner – who also testified at a House subcommittee last week on behalf of his fellow small cable operators – said Carlyle also sees the glass as plenty full.
“They’re not anxious sellers,” he said.
With operating cash flow rising at a 16% clip year to date, Jain added, “it’s not exactly a ship that’s tanking.”
No, it’s not tanking. It’s getting smaller. But it’s growing, with a chance to keep growing.