November 22, 2010
By Michael Grebb
As part of our ongoing Q&A series with select members of our CableFAX 100 and Most Powerful Women lists, we asked CableFAX 100 honoree and Time Warner Cable COO Landel Hobbs to walk us through his vision of the MSO’s strategy as it charges into 2011. While our women’s event is sold out, we still have a few seats for our CableFAX 100 luncheon in NYC on Dec 9. Register HERE.
Despite basic sub losses, Time Warner Cable just reported a stellar quarter and is even buying back $4 billion in stock. Is it becoming more about subscriber quality than quantity?
We’re a diverse company and becoming more so. It might be too obvious to say at this point, but we’re definitely not just a video company anymore. You can see that in our offerings—across our residential, commercial and ad sales businesses—and in how we’ve continued to grow overall despite the tough economy and intense competition. Still, video remains our biggest service. As we pointed out in our third-quarter earnings report, we’ve experienced recent video sub losses. However, it has been more an issue of fewer connects than of increased disconnects, and the decline was mainly concentrated among lower ARPU customer segments. We’ve continued to grow, particularly among higher ARPU segments. We think the key to continued growth across the residential business is delivering different product sets for various customer segments. So we’re very focused on segmentation, and we’re seeing positive response to the ways we’ve begun customizing and marketing products depending on customers’ specific needs. Outside of residential, our commercial and ad sales businesses are having a very good year, which points to the power of multiple offerings.
As you roll out TV Everywhere, how does Time Warner Cable view the threat from over-the top services? Furthermore, do you see any TV Everywhere marketing challenges?
I’ll make three key points here. One, as a distributor, we have to focus on delivering what we call the 4 Any’s. Our firm belief is that consumers want access to any content, anywhere, any time and from any device. A big part of that is how we deliver content outside the home. Our TV Everywhere capability is a piece of the answer. We’re pursuing it, as our agreement with ESPN to deliver authenticated content to our video subscribers demonstrates. Two, we have to constantly focus on our innovation cycles. That’s critical for delivering on “anywhere,” “any time” and “any device” in a quick manner so customers will have no reason to go over the top or elsewhere—especially considering the breadth of our content. Third, content owners need to work out what they’re doing with respect to content over the top. The dual revenue stream model works well for consumers because it enables cable networks to continue producing the high quality content our customers enjoy.
As we head into 2011, what's the biggest potential operating challenge for Time Warner Cable and the cable industry at large?
For us, it’s staying completely focused on the customer. Everything that every one of us does—all 47,000 Time Warner Cable employees—has to be focused on the experience from the customer back. It can’t be a company-down approach. We have to deliver a differentiated customer experience that’s linked to our brand—a brand that says “we give you more control in ways that are simple and easy for you, the customer.”
What's your view on how cable operators and programmers can avoid channels getting pulled during retrans talks—and why do you think Washington should step in?
When consumers get put in the middle of retransmission consent disputes, it inconveniences them and ultimately hurts the broadcaster and distributor. While going dark is never a good outcome, when broadcasters threaten blackouts we have no choice but to educate customers on what it means for them since the price they pay is directly impacted by what we pay for programming. If we don’t control excessive programming increases, it means higher costs for customers. We’ve found most consumers appreciate that we’re educating them, even though they still don’t like it and don’t want to be put in the middle. Distributors and networks must always remember that. We will continue to work hard to reach fair agreements, but we believe existing retransmission consent rules – set by the government almost 20 years ago – have not kept up with a changing marketplace. The rules are outdated, and they’re in urgent need of reform in order to avoid more public battles.
3DTV has become a hot topic lately. But consumer demand remains uncertain. What's your biggest concern and/or hope about 3DTV from a cable operator's perspective?
We’re following consumers on 3DTV. We’ve demonstrated we can deliver it, so we’re ready—if and when there’s demand.
Talk about the challenges of creating value tiers for subscribers who don't want as many channels. How do you preserve the all-you-can-eat business model while giving customers more choices? And how is demand holding up for higher-end fare?
We’ve heard loud and clear from customers that they want flexibility in packaging, including the ability to buy smaller packages. We’re working hard to deliver what they’re asking for. [EDITOR’S NOTE: Shortly after this interview, Time Warner Cable announced that it would launch its first value-tier “TV Essentials” package in NYC]. Even if we weren’t in a bad economy, we’d still want to deliver customized products and experiences to specific customer segments, which is smart business in any environment. And it just so happens our lower ARPU customer segments are most affected by the economy and are the same customers who are really shouting about smaller packages. With respect to “higher-end fare,” I would add that, even with the tough economy, we’re still seeing good demand from higher ARPU customer segments.