Ever-increasing competition from satellite TV has become the top strategic concern at Time Warner, which is planning a get-tough strategy to win back subscribers from Dish Network and DirecTV, according to cable unit chairman Don Logan.
“We don’t like losing cable subscribers,” Logan said, outlining the company’s strategy at a Goldman Sachs media conference in Manhattan on Tuesday. He added that he was spending a lot more time in Connecticut, where Time Warner Cable is located, than at the Dulles, Va., headquarters of AOL.
Time Warner’s cable division, which generates a third of the company’s cash flow, has been under increased assault from News Corp.-controlled DirecTV and EchoStar’s Dish Network, which together are picking up close to 800,000 subscribers a quarter.
Much of those gains are coming at the expense of cable. Time Warner Cable lost 21,000 customers in the second quarter.
Logan said the sat operators have been better at selling their service, luring customers with cheap introductory offers and then up-selling them to higher-priced tiers.
Time Warner is planning a series of initiatives to win subs back, Logan said, including introductory discounts, reduced fees for bundled services like high-speed Internet and phone service, and free video-on-demand.
Company plans to expand its cable footprint by bidding with Comcast for Adelphia Communications. “We’ll add systems where they make sense but not increase our scale for its own sake,” he said.
Logan said it would get tougher for new and low-rated cable channels to find space on the Time Warner system. “We believe there are already a lot of channels out there,” Logan said. “The pricing equation for channels not delivering ratings will be different.”
Rather than launch channels, Time Warner will focus on investing in the current lineup: HBO, TNT, TBS, CNN and the Cartoon Network.
One key hit, such as “The Sopranos,” can hugely benefit the cable business and DVD sales, Logan said. “Sopranos” episodes are the most watched on Time Warner’s subscription VOD service.
The focus on cable unseats AOL as the top strategic concern for the company.
Far from fixed, AOL is nevertheless in growth mode, and Logan expects double-digit returns from the unit. But he gave notice that TW’s online division could still find itself on the block if it doesn’t perform.
“It has to earn its place in our diversified portfolio,” Logan said.