TWC Drops on 126K Sub Loss; Focusing Now on High-Speed Data

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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
last Thursday.

Marcus, speaking on a conference call with analysts
to discuss third-quarter results, said the nation’s secondlargest
MSO is building an “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 about 3.7 million
cable video customers in its footprint either don’t buy
broadband at all or get it from another source, a fact he called
“inexcusable and unacceptable.” He
estimated 2 million are telco digital
subscriber line customers.

Marcus didn’t want to reveal too
many details, but said past marketing
efforts that have centered on
speed have missed the mark.

“We’ve discovered that the naked
speed message has been insufficient to win those [digital subscriber
line] 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 extra focus on broadband comes as video and phone
customers are on the decline. In the third quarter, revenue
and cash flow growth were steady at 4% each, but basicvideo
subscribers declined by 128,000 (vs. 155,000 in the prior
year) and residential phone customers declined for the
first time ever, by 8,000. In contrast, residential broadband
customers increased by 89,000 in the period.

Investors, spooked by the weaker-than-expected
quarterly results, drove Time Warner Cable shares down
7.7% ($5.46 per share) to $65.17 each last Thursday.

In a research note, Sanford Bernstein cable and satellite
analyst Craig Moffett noted that broadband is being increasingly
asked to take up the slack from video and phone. He
added that it appears to be up to the task.

“If broadband is the anchor product, then video is increasingly
simply the anchor,” 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
rolled out whole-home DVRs earlier this year, is constantly
updating its iPad video app, 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.

Marketing efforts haven’t been exclusively tied to broadband,
either. Marcus said TWC recently relaunched its
high-end Signature Home campaign with slick television
ads emphasizing 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” highspeed
data product to pair with the TV Essentials offering.