Cable Losing ‘Bottom-End’ Subs to DBS


New York -- DirecTV Inc. and EchoStar Communications Corp. pounded cable operators in the second quarter, with subscriber losses dropping basic-cable penetration to a measly 54.9% nationwide.

But some industry executives said most of the customers who are abandoning cable for satellite these days are older ones who spent little on cable, often subscribing to basic-only packages.

“The subscribers who are leaving us tend to be on the bottom end of the spectrum,” Cox Communications Inc. senior vice president of marketing Joe Rooney told attendees at a collaborative marketing seminar here Thursday that was sponsored by the Cable & Telecommunications Association for Marketing.

Leichtman noted that DirecTV and EchoStar picked up 749,000 net new customers combined during the second quarter, while cable operators lost about 350,000 in the same period.

“The net adds are beginning to wane a little bit. The impact of DBS [direct-broadcast satellite] has been very strong,” said Leichtman, founder of Leichtman Research Group Inc., who moderated the panel, which also featured Scripps Networks executive VP John Lansing.

Cox and Cablevision Systems Corp. remain the only MSOs with basic-cable-penetration rates above 60%, with Cablevision at 66% and Cox at 60%, Leichtman said.

Charter Communications Inc. leads the industry in digital-cable penetration with a 43% rate, followed by Mediacom Communications Corp. at 25%, he added.

Rooney said Cox -- which continues to grow its basic-subscriber base, albeit at a lower rate of 0.63% annually -- has found that many Cox subscribers who left cable for satellite in recent months were basic-cable-only customers.

Some of those were DBS subscribers who also bought basic-cable packages in order to receive local broadcast networks, but who decided to drop cable after DirecTV and EchoStar expanded the number of markets where they offer packages of local-broadcast signals, Rooney added.

Most subscriber churn occurs when customers move to new cities. The panelists spent much of their time discussing CTAM’s new Cable Movers Hotline, in which MSOs direct customers who call to disconnect cable service to operators near their new homes.

Rooney said the program has been effective in markets like San Diego. When a consumer moves to the city, their first phone call is typically to order electricity service, followed by local phone service, then cable.

With SBC Communications Inc. offering local telephone customers a bundle that includes high-speed data and video, many of those customers will order a triple-play bundle from SBC without ever hearing of the Cox brand, Rooney said.

Scripps has also chipped in at the Cable Movers program, supplying MSOs with cross-channel promos that tout both the hotline and Design to Sell, a program on Scripps’ Home & Garden Television, Lansing noted.

Cox has also reduced churn by offering a $10 discount to subscribers who buy video, voice and high-speed-data packages from the MSO, with some Cox systems allowing customers to use the $10 to get a free premium service, free digital cable or $10 off their bill, Rooney said.

Also at the seminar:

• Rooney brushed aside the recent joint venture announced by TiVo Inc. and Netflix Inc. to eventually offer TiVo users movies that could be downloaded to digital-video recorders, calling it “a lot of hot air” since TiVo and Netflix won’t be able to distribute movies to viewers in better windows than cable operators.

“The RBOCs [regional Bell operating companies] have mastered the press release, and now, TiVo/Netflix have mastered the press release,” Rooney added.

• Lansing -- who will succeed Ed Spray as Scripps Networks’ president in January, and who previously ran Scripps’ TV-station group -- criticized dual must-carry proposals. While the National Association of Broadcasters has been pushing for regulations that would force cable operators to carry both analog and digital networks from local broadcasters, Lansing called dual must-carry “a waste of precious spectrum.”

• Rooney called for more local affiliate promotions that involve cable programmers and local systems’ ad-sales, public-affairs and marketing departments. “If there’s a four-way win, that’s the best,” he added.

• Scripps -- which has provided content from its 15,000-hour library geared toward subscribers who get Comcast Corp.’s free-on-demand platform in Philadelphia -- is looking to provide unique local video-on-demand content to other operators, Lansing said.