Ex-Subs Didn’t Buy Much

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

But some industry executives said last week that many of the customers abandoning cable for satellite these days are older consumers who often bought only basic packages.

“The subscribers that 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 collaborative marketing seminar here last Thursday, sponsored by the Cable & Telecommunications Association for Marketing.

Still, analyst Bruce Leichtman warned that satellite continues to eat into the industry’s core basic-cable customers.

DirecTV and EchoStar’s Dish Network picked up 749,000 net new customers combined during the second quarter, while cable operators lost about 350,000 customers.

“The impact of DBS has been very strong,” said Leichtman, of Leichtman Research Group, who moderated a panel that also featured Scripps Networks executive vice president John Lansing.

Cox Communications Inc. and Cablevision Systems Corp. have the top basic-cable penetration rates, with Cablevision at 66% and Cox at 60%, Leichtman said.

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

Rooney said Cox — which continues to grow its basic-cable base, albeit at only 0.63% per year — has found that many of its customers who’ve left cable for satellite in recent months had bought only basic cable.

Some were satellite customers that bought basic cable to receive local broadcast-TV stations, until DirecTV and EchoStar added those channels.

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

Rooney said the program has been effective in markets like San Diego. When people move to the city, typically they first order electricity, then phone service and then cable.

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

(Scripps has pitched in, supplying MSOs with cross-channel promos that tout both the Cable Movers Hotline and the Home & Garden Television show Designed to Sell, Lansing said.)

Cox has also reduced churn by offering a $10 discount to subscribers that buy video, voice and HSI, with some Cox systems allowing customers to use the $10 to get a free premium service or free digital cable.

Rooney urged more local affiliate promotions that involve a cable programmer and a local system’s ad-sales, public affairs and marketing departments. “If there’s a four-way win, that’s the best,” Rooney said.

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