Add WideOpenWest (WOW) to the growing number of cable operators that have put broadband in the driver's seat and relegated video to passenger status.
"Traditional video continues to be a less meaningful portion of the business as our product mix shifts to higher margin HSD (high-speed data)," WOW CEO Teresa Elder said late last week during the company's Q2 earnings call. "However, this does not mean video is irrelevant."
She said video consumption on WOW's networks is actually rising, even though the way customers are consuming it continues to pivot toward over-the-top sources.
"Often when a customer doesn't have linear video, their Internet usage rises significantly because video is now being consumed over the Internet," she explained. "This shift in behavior drives our commitment to offering our customers the ability to have a full access to video, however it is presented."
Like some of its cable peers, WOW is supporting this trend by embracing and integrating OTT services. In addition to integrating Netflix with its Ultra TV offering, WOW has recently inked a deal with Philo, a virtual MVPD that offers a slimmed-down, sports-free TV streaming service that features a cloud DVR and starts at $20 per month.
But cord-cutting and other shifts in the pay-TV landscape are eroding WOW's pay-TV base. In Q2, the company lost about 9,900 video subs, ending the period with 388,100.
"We absolutely do lead with broadband. That is our key product," Elder said.
But even that portion of WOW's product slate wasn't picture perfect in Q2 -- the company lost 400 broadband subs, ending the period with 765,500 as results were weak in a quarter that is typically marked by "seasonality" as college students return home and snowbirds prepare to migrate to their summer locations
Elder noted Q2 is usually WOW's toughest in any given year, but she attributed broadband weakness in the period to "some major systems changes" that WOW made in an effort to improve its support systems and customer care organization for both inbound sales, online care and in the way it dispatches techs in the field.
"Those major system changes required us to retrain many... of our people, and that impact softened the growth in HSD as we went through those changes," Elder said. With those changes now largely behind WOW, she said the company feels good about the momentum it saw coming out of June.
Despite the Q2 broadband subscriber hiccup, WOW is seeing ARPU tick up in the category as customers move to higher-speed tiers (WOW does not cap broadband usage or implement usage-based data policies). Elder said WOW saw a year-over-year doubling of customers on its higher-level tiers -- 500 Mbit/s and up to 1 Gbit/s.
The company is also pushing ahead with an "edge-out" strategy in which it is extending its HFC and fiber networks into new areas along the fringes of its traditional franchise areas. As of June 30, those projects reached 152,600 homes passed. However, total Q2 capex fell to $61.7 million, versus $77 million for the year-ago quarter.
Total Q2 revenues dropped 0.5%, to $289.7 million. Business services remained a bright spot, as revenues in that category rose 5.2% to $34.3 million.
Analysts on the call openly wondered if WOW, whose stock is considered undervalued, might consider selling some assets off to a private investor or take the company private in an attempt to generate additional value.
Elder said the company remains "very optimistic" about its growth prospects. "But, generally, we always look at a variety of strategic alternatives... We feel good about the markets that we serve and are committed to those markets," she added.
- WOW! Revenues Dip in Q2 Amid Reduction in TV, Phone Subs
- WOW & Philo Bundle Up
- The Cord Cutters Are Right
- Cord-Cutting Rate Set to Reach Record High in Q2
— Jeff Baumgartner, Senior Editor, Light Reading