Rutledge: Over -The-Top Could Help Moderate Rising Content Costs

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Over-the-top programming, the source of many a content distributor's nightmares, could help moderate rising programming costs in the future, Cablevision Systems chief operating officer Tom Rutledge told an audience at an industry conference Thursday.
"The rich [programming] package we provide is extremely valuable to customers and there is pricing power in that package," Rutledge said at the Bank of America Merrill Lynch Media , Communications and Entertainment conference in Beverly Hills, Calif. "On the other hand, you have people experimenting with over-the-top television, which if successful would tend to make that package less stable, which will change the balance of costs. I'm not sure how that goes."
Asked about a la carte programming, Rutledge said he would offer every network ala carte if he could, but the programmers won't allow it.
"I'd love to sell Netflix as a service on my cable system," Rutledge said. "Why not? There are other things I'd love to sell ala carte and I think I could sell deep penetration of products with our marketing capabilities. Ala carte would be the most preferential way. I don't see the word breaking up, though, into an ala carte scheme in the near future."
Rutledge added that while Cablevision isn't seeing a big rise in cord cutting, it is embracing Internet programming through its Optimum Link PC-to-TV service which allows customers to watch content from their computer on their TV screens.
"Our goal is to put everything that's on the Internet on all the screens in the house," Rutledge said. "We're moving rapidly to make that technology work even better and we think within a matter of months we'll have a very robust system where customers can take their Netflix product, whether they have a device that carries Netflix or not, or Hulu or any other over-the-top service and put it on the TV. To the extent that that has a moderating effect on our programming costs, that's good. To the extent it satisfies customers, that's good."
Rutledge added that although the slumping housing market, the sluggish economy and the residual effects of its retransmission consent battle with Fox broadcasting last year have impacted subscriber growth, he still sees plenty of room for growth.
Cablevision lost about 35,000 basic video customers in the fourth quarter after Fox broadcasting blacked out its local stations in New York for two weeks in October. Those subscriber losses continued in to the first quarter (8,000) and the second quarter (23,000) for the company, leading some analysts to wonder if the company growth juggernaut was changing course. Rutledge said he continues to see growth in traditional services and new technologies.
"Yes, we are in a difficult economy and we've had issues this year and issues coming out of last year with our fight with News Corp. going into 2011," Rutledge said. "... As a fundamental business, we think we can continue to grow residential penetration."
Chief financial officer Greg Siebert, also speaking at the BofA conference, agreed that there is room for growth at the company, but not through acquisitions. After closing its deal to purchase Bresnan Communications in December, Seibert said "right now there is nothing in the cable market that we see that looks attractive to us." He added that the company will continue to focus on growing the business and maximizing returns to shareholders.

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