Cable Companies See Subscription Growth Slow

Young Customers Shift to Broadband; Verizon Cuts In on TV

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NEW YORK (AdAge.com) -- It looks like cable might not be worth the price tag to some in a tight economy, as consumers cut back on their cable and satellite subscriptions at faster rates than anticipated. The top three cable companies -- Comcast, Time Warner Cable and Charter Communications, respectively -- have already been hard hit.

Comcast's growth was cut in half in fourth-quarter 2008 compared to the same period in 2007. It added 247,000 digital cable subscribers in fourth-quarter, vs. 530,000 the year prior, 184,000 high-speed Internet customers vs. last year's 341,000 and 340,000 voice customers, vs. last year's 490,000.

"The reality is we are starting to see the beginnings of core cutting, where people, typically young people, are saying, 'All I need is broadband. I don't need video.' And obviously they are already saying they don't need wire-line phone," said Glenn Britt, CEO of Time Warner Cable, in his company's fourth-quarter earnings call earlier this month.

Bankruptcy protection
Charter Communications announced its plan to file for bankruptcy protection by April 1 after losing 75,100 basic-cable subscribers in the fourth quarter of 2008 alone. It gained 63% fewer digital-video customers, 55% fewer high-speed-internet customers and 52% fewer telephone customers than in the same period in 2007.

EchoStar's Dish Network lost 10,000 subscribers in the third quarter of 2008 alone, leading to the subsequent departure of Chief Marketing Officer Jessica Insalaco last month. Ira Bahr recently re-joined the company as its new exec VP-CMO, having previously served as Dish Network's senior VP-marketing from 2001 to 2002 and president of BingoTV, an interactive game channel owned by EchoStar. EchoStar Chairman-CEO Charlie Ergen has been so desperately seeking subscribers he made a $400 million investment (and subsequent surprise takeover bid) in Sirius XM Satellite Radio, the troubled radio company that also received funding from Liberty Media, home of DirecTV.

As Dave Watson, exec VP-operations at Comcast Corp., told investors at the UBS Global Media and Communications Conference in December, "We're getting a lot of telephone calls right now saying, 'This is a tough time; what can you do?'"

Telecom's gain
Yet cable's loss has been telecom's gain, particularly in the case of Verizon Fios. The telco added four major markets to its TV service in the third quarter of 2008, including New York City, and inspired a counter-attack marketing campaign from Time Warner Cable in September. Despite Time Warner's best efforts, however, Fios gained 303,000 TV subscribers in the fourth quarter of 2008 and 280,000 Fios internet subscriptions.

Alex Dudley, a spokesman for Time Warner Cable, said the triple play, or bundled phone-cable-internet subscription package, remains the focus of the cable company's marketing efforts. "Clearly we understand everybody takes a really good, hard look at the money they're spending and making tough decisions. We're making sure they understand the value of the bundle and services in our offering."

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