Time Warner Cable is stepping up marketing efforts to get the 3.7 million video customers in its footprint that don't currently subscribe to its high-speed data package on the rolls, chief operating officer Rob Marcus told analysts Thursday.
Marcus, speaking on a conference call with analysts to discuss third quarter results, said the nation's second largest MSO is building "action-oriented" marketing organization specifically focused on getting, keeping and growing subscribers. On the acquisition side, the priority is on extending its broadband reach. Marcus estimated that currently about 3.7 million cable video customers in its footprint either don't buy broadband at all or get it from another source - he estimated 2 million are telco digital subscriber line customers - a fact he called "inexcusable and unacceptable."
Marcus didn't want to reveal too many details, but said that past marketing efforts that have centered on speed have missed the mark.
"We've discovered is that the naked speed message has been insufficient to win those DSL customers over," Marcus said. "What we need to do is do a better job explaining what speed translates to in terms of the usage experience - no buffering on video consumption, the ability to have more devices connected in a single home without a degradation in the experience. Messages that put some customer behavior color on what's being offered."
The redoubled marketing efforts weren't enough to appease investors at least initially, who seemed spooked by the weaker than expected quarterly results and drove Time Warner Cable shares down 8.2% ($5.77 per share) to $64.86 each in early trading Thursday.
In a research note, Sanford Bernstein cable and satellite analyst Craig Moffett wrote that broadband performance bolstered weakness in video and phone and is being increasingly asked to carry the rest of the business. He noted that it appears broadband is up to the task.
"If broadband is the anchor product, then video is increasingly simply the anchor. Subscribers are falling, costs are rising, and margins are contracting," Moffett wrote.
Time Warner Cable chairman and CEO Glenn Britt has called broadband the anchor product in the past, but video isn't being ignored. Britt said on the call that the company is constantly updating its iPad video app, rolled out whole-home DVR's earlier this year, is testing a home gateway product and has deployed a cloud-based user interface in parts of Syracuse, N.Y., Los Angeles and Dallas that will be launched more broadly in the next several quarters.
The MSO's marketing efforts haven't been exclusively tied to broadband, Marcus said TWC recently relaunched its high-end Signature Home efforts with slick television ads that emphasize the luxury lifestyle associated with the product, which has translated into increased call volumes and connections for the product, He estimated that average monthly revenue per customer for Signature Home is about $230, compared to $150 per month for the average triple play customer.
Time Warner Cable also has stepped up efforts for its lower end TV Essentials package, which was launched in New York City and Northern Ohio earlier this year. TV Essentials is now available in Upstate New York and should be available throughout the footprint by the end of the year. In addition, the MSO is experimenting with a "light" high-speed data product to pair with the TV Essentials offering.
Residential phone performance was soft in the quarter - Time Warner Cable lost 8,000 phone subscribers, the first time in its history - which Marcus attributed in part to a marketing misfire and pricing disparity. He added that the MSO is becoming more aggressive on price, evident by a new $19.95 per month voice bolt-on offering for existing single-play video customers that should drive incremental revenue.
Broadband customers are also enjoying some increased benefits. In Los Angeles, for example, Time Warner Cable has created 750 Wi-Fi hotspots in the city that are free for all of its standard tier and above broadband customers. Customers that subscribe to its high-end 50 Megabit per second Wideband50 service also receive 2 Gigabytes of 3G and 4G mobile broadband access at no additional charge. Standard and Turbo customers can receive the 3G and 4G mobile service for an additional $20 per month and Turbo Plus and Wideband 30 customers can get it for an extra $10 monthly charge.
Marcus added that Time Warner Cable only began marketing the mobile services last month, but has seen an almost immediate increase in take rates for its higher-end broadband tiers in Los Angeles.
"Early indications are that this approach to mobility resonates more than some of the earlier efforts we've made to sell standalone wireless broadband," Marcus said.