The top slice is made up of media companies that want to jack up program fees by bundling their most popular channels with the lesser lights. Take it or leave it. The bottom slice is made up of subscribers who want maximum selection at the lowest price. In the middle are the cable and satellite services that need to appease both sides. And of course there's the competition: Netflix, Hulu, Amazon, etc. Time Warner Cable CEO Glenn Britt calls it a "complicated set of structural imbalances" that can't go on forever (the company lost 119,000 video subscribers in the first quarter). If you're a TWC subscriber, you might be noticing a barrage of commercials trying to point out all the services it delivers - services not available if you cut the cord. The good news for pay TV companies is that cord-cutting does not happen all that often because, let's face it, you're giving up a lot of stuff - sports, live events, most channels. Analyst Craig Moffett says in a new report that the cable guys are in decent shape, for now. I profile TWC in the June issue of Los Angeles magazine. Some excerpts:
The case against TWC, and pay TV in general, omits quite a bit, starting with the obvious: Free television in the days before cable--we're talking about maybe a dozen stations in the L.A. area, many of them difficult to receive--has little relation to the hundreds of channels that are available with the most basic pay-TV packages. TWC charges you more than $1,200 a year because you're getting massive amounts of programming that the cable company must pay for, including rights to Laker and Dodger games. The costs of such megadeals are passed along to customers. That's the simple explanation, but there are many permutations in getting those programs to your home, especially since video streaming has become a growing alternative. The result is a free-for-all unlike anything the industry has ever seen.
At the local TWC headquarters, a plain-vanilla building in the middle of El Segundo's business district, the emphasis seems to be on erasing memories of those bad old days. A mission statement that hangs on the wall of the reception area includes a handful of tenets, such as "This is a great company. We are working to make it even better" and "We make our customers' lives simpler and easier." That last one almost sounds like a joke, which is part of the problem. "I don't think people are connecting the price they pay with the value or potential value they can get," says Kelly Atkinson, the company's chief marketing officer in the western region (TWC also operates in Texas, the Carolinas, the Midwest, the Northeast, and the New York area).
Executives won't say it in so many words, but the strategy is no longer tied to being all things to all viewers. In December TWC decided to drop Ovation, a Santa Monica-based independent arts channel that was delivering tiny audiences but costing only a few cents per subscriber per month (ESPN costs $5 per subscriber). "They're acting like a bully," says Chad Gutstein, Ovation's chief operating officer, who has been on a PR blitz in response to the move. "There's no rational business argument for cutting off viewers from Ovation." Actually, it was quite rational--TWC says that the cost of carrying the arts channel wasn't justified by the number of viewers being generated. The airlines, after all, don't give away tickets because their planes are going to be flying anyway. Other independent channels that draw small audiences and aren't bundled with the big content providers--channels like Hallmark, WE tv, and IFC--could be on their way out as well.