Marcus: OTT Resistance Is ‘Foolish’

Says OTT Drives Broadband, But Calls Cable Bundle Best Value

Time Warner Cable chairman and CEO Rob Marcus told analysts Thursday that the cable industry should embrace over-the-top video, but added that at this stage of the game, the full cable bundle still appears to present the best value.

“At the highest level, we embrace over-the-top video,” Marcus said on a conference call to discuss second quarter results. “It highlights the value of the high-speed data offering that we deliver. We think it would be foolish to resist what might otherwise be an attractive behavioral trend.”

At the same time, Marcus said operators want to make sure they don’t lose customers to OTT and so far he said cable offers more content, better picture quality and more on demand choice.

“I feel like we can compete on that front,” Marcus said. “To the extent we don’t, shame on us.”

Already several programmers have launched direct-to-consumer video initiatives, including Home Box Office with HBO Now, Showtime and CBS All Access. Others are also looking into direct-to-consumer products – Walt Disney Co. chairman and CEO Bob Iger recently said ESPN could go direct in five years or so, and yesterday Starz CEO Chris Albrecht said a direct offering is one of the things the premium channel continues to evaluate.   

But Marcus warned that content providers looking to bypass distributors and offer programming directly to consumers would be safe to price those offerings fairly.

“As long as the playing field is even, and costs are comparable I think we will be able to compete effectively,” Marcus said. “To the extent that programmers begin to offer on a direct basis their offerings at prices lower than what they offer to us on wholesale basis, or with more flexibility to package the way that they want, I think it’s going to undercut our ability to sell. That’s going to be a negative for us, but more significantly it’s going to be a negative for the primary distribution channel for all of those providers.”

Marcus added that he was “intrigued” by the recent trend toward so-called skinny bundles, adding that TWC has experimented with smaller channel packages like other distributors and will continue to. But he added that so far, customers are leaning toward the more robust packaging, with 80% of its current customer base and 82% of new video connects taking the full bundle.

“Choice is great, experimenting with skinny bundles is great, and we’ll do it to the extent we see stuff working in the marketplace and is consistent with our agreements with programmers, but we shouldn’t lose track of the value of the bundle as well,” Marcus said.