Time Warner Cable to Test Cheaper Cable Package to Lure Thrifty Customers

Time Warner Cable Inc., the second- largest U.S. cable operator, is testing a slimmed-down cable package that excludes Walt Disney Co.’s ESPN in an effort to win back and retain economically strapped consumers.

The stripped-down service, known as “TV Essentials,” will debut in New York City on Nov. 22 for $39.95 a month, Maureen Huff, a Time Warner Cable spokeswoman, said in an interview yesterday. The package will feature local and major broadcast networks along with 12 of the 20 highest-rated cable networks, including the Disney Channel and MTV. Fox News and Comedy Central won’t be offered, she said.

Time Warner Cable lost 155,000 basic video subscribers last quarter, primarily because of a weak economic environment, Chief Financial Officer Rob Marcus said at an investor conference yesterday. The company has been battling fee increases from programmers, which are typically passed along to consumers in the form of higher bills.

Marcus said the company realized its customers wanted smaller, cheaper cable packages following the recent programming feuds with News Corp.’s Fox and Walt Disney.

“What we’re planning to do is deliver on that customer need,” said Marcus. “We’re planning on delivering a package, or possibly more than one package, of programming that will exclude some of the higher priced networks. Because we’re excluding the high priced channels, we have the ability to charge a lot less for it.”

Photographer: Jay LaPrete/Bloomberg

A Time Warner Cable logo appears on a sign outside the company's offices in Columbus, Ohio. Close

A Time Warner Cable logo appears on a sign outside the company's offices in Columbus, Ohio.

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Photographer: Jay LaPrete/Bloomberg

A Time Warner Cable logo appears on a sign outside the company's offices in Columbus, Ohio.

Costly Channel

ESPN is the most costly channel, bringing in about $4.08 for each cable subscriber a month, according to research firm SNL Kagan. By comparison, Lifetime, which will be included in the cheaper package, costs 28 cents a month per subscriber.

“The distribution requirement for ESPN has not changed in the last 25 years, which is to include ESPN in the first or second highest penetrated tier of service,” ESPN said in an e- mailed statement. If “TV Essentials” catches on and becomes one of Time Warner Cable’s most requested offerings, the cable operator would include ESPN in the offering.

Time Warner Cable plans to analyze the results of its trials and roll out “TV Essentials” in its other markets next year, Huff said. The package doesn’t allow customers to use a high-definition receiver or digital video recorder, and won’t be bundled with Time Warner Cable’s other products such as broadband and phone service.

By comparison, in Manhattan, Time Warner Cable’s expanded digital starter package that includes 130 channels, costs about $60 a month. The $39.99 price for “TV Essentials” in New York is a 12-month promotional price, Huff said. The company plans to offer the same trial in Northern Ohio in December for $29.99. The pricing will vary in different locations, she said.

‘Lower-End Customers’

“The ‘TV Essentials’ package is a critical step in addressing the needs of lower-end video subscribers, and represents an extraordinary compromise between content owners and distributors,” said Craig Moffett, an analyst at Sanford C. Bernstein & Co. in New York. “In agreeing to support this package at this price point, the media companies appear to be acknowledging the importance of lower-priced offerings to maintain relevance to lower-end customers.”

“TV Essentials” will offer Viacom Inc.’s Nickelodeon and VH1 networks; Scripps Networks Interactive Inc.’s Cooking Channel and HGTV; Time Warner Inc.’s CNN and TBS; News Corp.’s FX channel; and NBC Universal Inc.’s Bravo, USA and a selection of others.

Time Warner Cable fell 6 cents to $62.69 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have gained 51 percent this year.

To contact the reporter on this story: Kelly Riddell in Washington at kriddell1@bloomberg.net.

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net.

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