After years of attempting to enchant Wall Street by driving growth in high-speed Internet and other new businesses, some MSOs are shifting more resources to market their core business — video programming.
Operators are dispatching door-to-door sales teams to pitch video and use products like telephone service to get new basic cable customers in the door. MSOs say they're focused on attracting new video customers and keeping the ones they have.
“While [high-speed data] has been has been a real success story for us — we expect the same thing to happen with Comcast Digital voice — that does not mean that we won't continue to have a strong marketing effort behind our video product,” said Comcast Corp. senior vice president of marketing Marvin Davis.
KEY CABLE WEAPONS
Davis and other cable executives said emphasizing new products in marketing messages such as on-demand programming will remain a key weapon for cable as MSOs face grueling competition from DirecTV Inc. and EchoStar Communications Corp.
Comcast and Time Warner Cable offer libraries containing hundreds of free on-demand programs, and Cox Communications Inc. said last Thursday it would add more than 700 hours of VOD fare from a dozen national cable networks to its FreeZone platform.
While operators insist they remain committed to marketing their core basic video and digital cable products, some top industry executives maintain MSOs will succeed not by focusing on basic-cable growth and retention, but by attracting high-end customers willing to buy bundles of digital video, cable-modem and telephone service.
“I think the whole premise that our business has to be measured by basic video subscribers is suspect,” said Char Beales, president of the Cable & Telecommunications Association for Marketing, which will hold its annual CTAM Summit this week in Philadelphia, where operators will look at ways to combat competition from satellite and telephone companies.
Beales pointed to the success that broadband distributor Ono has had in Spain, where about 90% of its customers take phone product, 60% order high-speed Internet service and 40% take video service. Ono general manager of clients and services Fernando Ojeda Gonzalez-Posada is one of the keynote speakers at this weeks confab.
“I think if you talk to any of the [U.S.] MSOs, they're now having good experience going and getting people to phone first, and then later upselling them to video. And that's what's going on around the world in a lot of these other markets,” Beales said.
That's a tactic Time Warner has tried this year in San Antonio, where Digital Telephone service is the first product that customer service representatives are instructed to sell when a new customer contacts the system.
“It's had a listing effect,” new Time Warner chief marketing officer Sam Howe said. “We think it's having a very positive effect, just on basic-TV customers,” as Time Warner posted a net gain of 26,000 basic video customers in the first three months of 2005.
Second-biggest U.S. operator Time Warner added more basic-video customers during the first quarter than any other operator. Sixth-largest Cablevision Systems Corp., which has posted solid growth since it started charging new customers just $90 monthly for a triple-play bundle including digital phone, wasn't far behind, adding 22,000 basic customers.
Comcast lost 23,000 basic customers during the quarter, while Charter Communications Inc. lost 22,000 customers.
DirecTV and EchoStar continue to blow away all cable operators in subscriber growth, with DirecTV picking up more than 500,000 customers during the quarter, topping EchoStar's net gain of 325,000.
Tactically, some major MSOs are even using more door-to-door sales. Revenue at RCH Outsourcing Services, which handles door-to-door sales and collections for several MSOs, has jumped 19% this year, CEO Bob Halgas said.
“As our customers need to gain more subscribers, we get more phone calls,” Halgas said.
RCH has 1,200 employees, many wearing the uniform of the local operator they represent during door-to-door sales. Clients include Adelphia Communications Corp., Cablevision, Charter, Comcast, Cox Communications Inc., Time Warner and Mediacom Communications Corp.
Each door-to-door sales representative conducts 10 to 50 sales calls each day, depending on the neighborhood. Sales reps are paid based on productivity, and receive a commission on each sale. Most calls don't generate a sale: the average success rate on a typical acquisition campaign for non-subscribers ranges from 7% to 10%. When sales reps target neighborhoods entrenched with cable overbuilders, the success rate diminishes, Halgas added.
Converting non-paying customers also helps the numbers. RCH conducts subscriber audits, canvassing neighborhoods to attempt to sell cable programming packages to homes getting cable signals but not paying. Some are subscribers that disconnected cable service but the lines remain active.
Operators say they run some commercials aimed at selling video programming and retaining basic customers, but most believe focusing on bundled services is the best way to project their basic-video subscriber base.
ADVANCING PRODUCTS
“From a product standpoint, certainly the path we've been on of selling advanced products and making consumers aware of advanced products, like Adelphia On Demand, we think are critical and important ways to protect and grow our basic subscriber base, because they add value to the product,” Adelphia senior vice president of marketing Nancy McGee said.
“If you're [marketing] to drive revenue, that's not a good strategy,” she added. “But our strategy has been to offer more products that offer more value, and create value for customers.”
Howe also said some of Time Warner's upcoming ad campaigns would demonstrate how its video product is different than those of competitors, including spots for the MSO's pending “Start Over” time-shifted VOD service, which lets digital-cable customers who missed parts of a program to start it over from the beginning, so long as they use the feature before the scheduled end of a program.
“That will be our creative slant messaging — how the television experience that Time Warner brings you is different. We have more opportunities to create a story,” Howe said.
