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TWC Broadband Subs Soar, Video Slumps

Alan Breznick
10/31/2014

Even as Time Warner Cable achieves record broadband gains, it's still shedding video customers by the bucket despite all efforts to stem those losses.

Time Warner Cable Inc. (NYSE: TWC) posted strong increases in high-speed data subscribers in its third-quarter earnings report Thursday, racking up 108,000 new broadband customers, 92,000 of them on the residential side, as it carried out big speed hikes in three of its largest markets (New York, Los Angeles and Austin). That represented its best third-quarter broadband showing in five years, boosting its residential data customer total to slightly more than 11.5 million. (See TWC Speeds Along With Speed Hikes.)

Yet TW Cable continued to lose yet more video subscribers in the third quarter even as it scrambles to stop the bleeding by belatedly rolling out all-digital conversions across the US. The nation's second-largest MSO coughed up another 184,000 video customers in the summer quarter, reducing its overall video sub count to just over 10.8 million.

While the latest loss represent a big improvement over TWC's loss of 306,000 video subscribers in the year-ago period, the two quarters are not strictly comparable. That's because those prior losses occurred during the MSO's nasty month-long retransmission-consent fight with CBS Corp. (NYSE: CBS), when both CBS and Showtime were blacked out for TWC subs.

Further, this year's third-quarter video sub losses were actually heavier for TWC than its losses in the second quarter, when it shed 152,000 video customers. Plus, the company continues to lose both double-play and triple-play subs as its broadband-only base swells. As a result, TWC closed out September with nearly 700,000 more data subs than video subs, by far the biggest gap in cableland.


Want to know more about pay-TV subscriber trends? Check out our dedicated video services content channel here on Light Reading.


As it desperately scrambles to catch up with Comcast Corp. (Nasdaq: CMCSA, CMCSK), Cox Communications Inc. , Charter Communications Inc. , Cablevision Systems Corp. (NYSE: CVC) and other large US MSOs, TW Cable is aggressively upgrading its cable systems to all-digital transmission. In its earnings report, the company said it has now completed its all-digital upgrades in New York and Los Angeles, the nation's two biggest markets. (See TWC: Maxxing Out Too Late?)

But those "TWC Maxx" program upgrades don't seem to be making much of an impact on TWC's bottom line just yet. Despite the upgrades and the company's latest round of rate increases, its video revenues actually fell in the third quarter on a year-over-year basis, primarily because of the continuing decline in its video customer base. Residential video revenues slipped to just under $2.5 billion for the quarter, down 4% from $2.6 billion in the year-ago period.

Overall, TW Cable reported that its revenues rose for the quarter, climbing 3.6% to $5.71 billion, largely on the strength of its broadband performance and another stellar quarter for business services. But the company fell short of Wall Street's consensus revenue forecast of $5.74 billion, mainly because of its ongoing video struggles.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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Jack42
Jack42
11/1/2014 | 6:15:47 PM
Re: Terminal Velocity
As for voice, it cost them maybe $4/mo to offer it, but they charge $30-35.  you can add a base unit onto your wireless plan for $10.  That's the price bench mark if they want to keep the customer.

My guess is they will have to offer the $10 to keep people from switching to their wireless service.
KBode
KBode
11/1/2014 | 3:41:41 PM
Re: Terminal Velocity
Not just that, they're going to start seeing more digital voice subscriber losses as wireless voice quality improves and they realize they can save a decent chunk of change by going cell only.
mendyk
mendyk
11/1/2014 | 9:42:05 AM
Re: More Compelling Value Needed
If network operators can gain and keep customers for their broadband service, then conventional video packages will become increasingly marginalized. We've been seeing this for a couple of years now: Content licensing costs are destroying the old package model. Most operators now see this plainly and are putting their money on service that they know will have strong demand and that have costs that the operators almost completely control. Content companies are going to have a much harder time making the kind of money they've been pulling in over the past decade.
Jack42
Jack42
10/31/2014 | 8:26:38 PM
Terminal Velocity
Cable companies are going to find they are reaching terminal velocity on price that consumers are willing to pay for TV channels.  While we all love to have all the pay channels, at $300/mo makes doing netflix for $10 & Hulu+ for $8, starts looking like a much more economical decision.

As people upgrade to the TV's with built-in WiFi and the web based versions become more convient to acces, it will be a downward spiral for the cable tv services if they aren't mindful of the price. 

 
Phil_Britt
Phil_Britt
10/31/2014 | 1:38:37 PM
More Compelling Value Needed
Time Warner isn't available in my area, so I don't know how good or bad the service is. But most cable companies continue to raise rates without any corresponding increase in value. Yes, they need to continue to pay more for ESPN and other programming, but this constant increase of rates eventually pushes subscribers off a cost cliff that they can no longer climb.
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