Robbins Keeps Heat on Programmers - Multichannel

Robbins Keeps Heat on Programmers

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Cox Communications Inc. CEO Jim Robbins reiterated his stance on high programming costs at an industry conference last Tuesday, but added that the Atlanta-based MSO would not seek additional scale to received higher programming discounts.

Speaking at the Deutsche Bank Securities Media Conference in New York, Robbins said increased scale wouldn't really make a difference in lowering programming costs, pointing to the former AT&T Broadband as an example. Cox was one of several MSOs that considered acquiring AT&T Broadband last year.

"When we went through our due diligence with AT&T Broadband, we were stunned to see how little difference there was between the pricing we had and the pricing they had from programmers," Robbins said. "We had estimated in our own early valuations a 10% differential. It was half that."

Robbins said that Cox would attempt to get its fair share of programming discounts, adding that the MSO also would look at acquisition opportunities that would increase the overall rate of return.

'Fighting' words

"We will fight hard to get our fair share of the breaks that may or may not be forthcoming as the balance gets back in line between distributor and content provider," Robbins said. "There's no question that scale will be helpful. But I'm not going to recommend to my boss that we go out to get scale for the sake of getting scale. There's a lot of junky cable out there."

Robbins said Cox would do a deal, for the right property.

"But I would rather operate very effectively in the markets that I have and suffer what may be a little less benefit on the programming side, than to scale up and not have the opportunity to do voice, video and data in all the markets that we're serving," Robbins said.

But the Cox CEO conceded that Comcast Corp. — which acquired AT&T Broadband in November — will enjoy lower rates with its increased scale.

"There is no question that the Big Kahuna will get better pricing than we will," Robbins said.

Robbins added that despite his testimony before Congress regarding high programming costs in May, he remains against the reregulation of cable. He added that he agreed to testify after being asked by Sen. John McCain (R-Ariz.), head of the Senate Commerce Committee, to explain why cable rate increases exceed the rate of inflation.

"In 35 years in this industry I have never gone to the government for help," Robbins said. "But what I did I feel was important in the education process, so the members of Congress understand where the pressure is coming from. We are the first in line to the consumer and we're getting the rap on that."

Robbins spent the first part of his presentation taking a stroll down memory lane — remembering Cox's first road show in 1995, prior to its initial public offering.

While he said that some of the predictions Cox made during that road show didn't come true, the underlying concept — that broadband would serve as the platform for future industry growth — has stood the test of time.

"We foresaw competition on the near horizon; we foresaw the potential of the broadband platform," Robbins said. "We delivered on that strategy. It has delivered for us, and for you, far beyond what we could have imagined."

Robbins pointed to Cox's bundling strategy, adding that one-third of Cox's customer base takes at least two services from the MSO. Telephony has been one of the drivers of the bundle. Although available to about 41% of its customer base, Robbins said telephony is a "critical piece of bundling services." Cox, he said, plans to launch its 11th telephony market this year.

And Philadelphia-based Comcast, which has so far resisted plunging headlong into telephony services, will eventually have no choice, he added.

"Despite that our friends in Philadelphia have less than enthusiastically embraced the telephony business, they can't afford not to be there," Robbins said.

Earlier in the week, AOL Time Warner Inc. chief financial officer Wayne Pace said that despite declines at its America Online Internet service, results at its cable operations and cable networks continue to drive growth.

Time Warner Cable, which has about 10.8 million subscribers and accounts for roughly 33% of AOL Time Warner's total cash flow, continues to perform strongly. He added that video-on-demand and subscription VOD — fully deployed across TWC's network — are also showing strong preliminary results. Pace said at the DB Media Conference last Monday that more than 500,000 customers have used the SVOD service.

DVR demand

Digital video recorders – currently in 17 Time Warner Cable markets – have also shown strong results, Pace added. Almost 100,000 customers have signed up for DVR service.

"The sign-up rates have been better than we expected," Pace said.

HDTV service, currently being rolled out in company systems, is also nearing the 100,000-subscriber mark.

The continued growth at TWC and the cable networks — coupled with a strong box-office showing for The Matrix: Reloaded
for the Filmed Entertainment division — may cause AOL Time Warner to increase its financial guidance for the year. In the first quarter, AOL Time Warner said it expected mid-single-digit growth in revenue (from $41 billion in 2002) low-to-mid-single digit increases in cash flow (from $8.7 billion in 2002) for this year.

"All signs are very positive," Pace said.

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