Following tests in New York and Ohio, Time Warner Cable (NYSE: TWC) plans to broadly market its low-cost "TV Essentials" programming package on other cable systems, COO Rob Marcus said at a Goldman Sachs conference Wednesday.
The expansion, which will focus initially on the East coast, will see Time Warner Cable generate less revenue per customer, but will help the nation's second largest cable MSO grow overall revenue, Marcus said. Its strategy could help Time Warner Cable retain subscribers, but could hurt networks such as ESPN that aren't included in the package.
Looking to keep cost-conscious customers from cutting the cord on pay TV, Time Warner Cable has been marketing a $40 monthly package in New York that includes local broadcast stations and cable networks such as AMC, Bravo, CNN, HGTV, Lifetime and MTV. The package doesn't include ESPN, which is the most expensive cable network for TWC and other cable MSOs, or TBS, TNT and USA Network.
Time Warner Cable has been marketing TV Essentials for $30 monthly in Ohio. That price goes up to $50 monthly after 12 months. Marcus didn't say how Time Warner Cable will price TV Essentials in other markets when it expands the rollout.
Marcus said TWC has a good response from subscribers to TV Essentials in New York and Ohio. "The numbers are still pretty small, but the results are sufficient enough that we're going to roll it out more broadly," he said.
Most of the subscriber losses that TWC has seen are from customers than only buy its video service, Marcus said.
Also worth noting Marcus' appearance at the Goldman conference Wednesday:
- Time Warner Cable performed better in subscriber additions in August and September than it did in July, particularly in the Carolinas and Texas, Marcus said. "We're losing fewer video subscribers than we did a year ago, and we're gaining more high-speed data subs than we did a year ago. Voice continues to be somewhat softer than last year."
- TWC will increase the deployment of gateway devices containing six tuners, 1 terabyte of storage for DVR capability and the ability to transcode cable signals to IP format for distribution on a home network to smart TVs, low-cost digital set-tops and mobile devices. The gateways allow the MSO to replace pricey DVRS. "If we can replace multiple DVRs in a home with a gateway, plus one or more of these small IP set-tops, the total CPE [customer premise equipment] promises to be less expensive," Marcus said.
- Time Warner Cable has looked internally at the idea of marketing over-the-top video to subscribers outside its footprint, but has no plans to take on its fellow cable MSOs. "I wouldn't dismiss it out of hand, but we feel our real competitive advantage over the long term is our physical infrastructure," Marcus said.
- Following its acquisition of Insight Communications, Time Warner Cable doesn't see major cable acquisitions on the horizon. "There's nothing on our radar screen," he said.
- TWC's recent acquisition of NaviSite will help it market commercial services to small and medium sized businesses. The commercial sector "has been a tremendous business for us, and a tremendous avenue for new growth," Marcus said.
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