Time Warner Cable, the second- largest U.S. cable-TV operator, plans to keep scrutinizing and pressuring small cable channels even though they aren't the problem in consumers' big cable bills, the company said today.
"I don't want to say much numerically, but the actions we're taking are not going to dramatically change the direction of programing costs," Chairman-CEO Glenn Britt said on a conference call Thursday to discuss the company's fourth-quarter financial results. "I do hope that we can, over time, improve the perceived price value of the relationship, though, and clearly consumers, particularly people who are under economic duress, are looking at these big packages and saying it costs more than I can afford, number one, and number two, there's too many networks I don't watch and care about. And that's kind of what we're trying to address."
Time Warner Cable dropped Ovation at the end of the year, arguing that it shouldn't pay the arts channel to carry it when few viewers tune in and its promised focus on the arts has waned. The question is whether that will actually do much to alleviate the content cost crunch for Time Warner Cable and its video subscribers, something Mr. Britt acknowledged. But he suggested that sports, where the real cost crisis is coming from, at least has the leverage of viewer demand.
"Obviously sports and other really popular programing keep getting more and more expensive, and that's where most of the money is," Mr. Britt said. "But these networks that hang on and think they have the birth right to carriage even though hardly anybody watches them, those are the ones we're going to be taking a look at."
The company was part of a deal announced this week to secure the rights to show Los Angeles Dodgers games for 25 years starting in 2014 in a pact worth up to $8 billion to the team. Perhaps not coincidentally, the Los Angeles Times reported Tuesday that Time Warner Cable is notifying subscribers that their monthly bills for basic cable will leap 8.2% to $72.50 from $67.
Time Warner Cable's fourth-quarter profit topped analysts' predictions as the company lost video subscribers again but continued to add more internet customers.
Fourth-quarter revenue rose 9.9% from a year earlier to $5.5 billion, the company said, in line with the $5.51 billion average analyst estimate. Net income fell to $513 million, or $1.68 cents a share, from $564 million, or $1.75 a share, a year earlier, according to the company. Excluding one-time costs, earnings per share were $1.57, beating the $1.55 average analyst estimate compiled by Bloomberg.
Time Warner Cable added 75,000 residential high-speed data subscribers and gained 14,000 business customers for the services, it said in a statement. Average revenue per customer increased as the New York-based cable provider added a $3.95-a-month "rental" fee to customers using its wireless modems.
"The broadband business is the crown jewel," Todd Lowenstein, a fund manager at HighMark Capital Management, said before the results were released. "It's the centerpiece for what they do, and they have a compelling bundle proposition around it."
The cable operator lost 129,000 video customers as the basic cable subscriber base had declined since 2009 as customers switch to video services from phone and satellite companies. Streaming services such as Netflix also threaten to keep potential new cable subscribers from signing up. The decrease in video subscribers in the fourth quarter was unchanged from a year earlier.
~Ad Age staff and Bloomberg News~