Time Warner Cable CEO: Cable TV Pricing Is So High Because We're The Mercedes Of Entertainment

from the not-just-a-river-in-Egypt dept

Over the last year we've finally started to see the emergence of more flexible Internet video options like the "skinny bundle," where customers nab a cheaper, smaller base package of channels, with the option to pick and choose from add-on "channel packs." SlingTV is perhaps the most well-known option (though broadcasters have ensured it lacks DVR functionality), and Verizon has also been experimenting with the concept as well (and were sued by ESPN for their trouble). While not the pure "a la carte" play many had called for, it's at least a baby step away from massive, over-priced cable lineups.

Not surprisingly, however, the same cable industry executives that don't think cord cutting is real state they don't see what the skinny bundle fuss is about. In fact, Time Warner Cable CEO Robert Marcus recently crowed that the cable giant isn't seeing any interest in the skinny bundle:

"The headlines over the last several months have been way ahead of the facts," Marcus said. "We're not seeing this mass migration to skinny bundles. In fact, in the second quarter, roughly 82 percent of our video connects took the preferred bundle…which is the fattest of the fat bundle. It's still a great value. We can't lose track of that."

Marcus ignores several things here. One, Time Warner Cable lost 45,000 basic cable subscribers last quarter, users who are either fleeing toward more competitively-priced cable options, or toward the Internet video options Marcus pretends aren't slowly changing the game. Two, many existing Time Warner Cable customers continue to bundle services like television and voice with their cable service, because they're usually penalized financially if they try to purchase services piecemeal. Three, you might see broader adoption of more flexible channel options and pricing -- if you actually offered some.

Like most cable companies, Time Warner Cable pays a lot of lip service to "value," but the bottom line is that it refuses to compete on price. And these companies will continue to refuse to compete on price until Internet video reaches critical mass and customers begin to defect in greater numbers. Until then, cable executives spend the lion's share of their time trying to somehow justify cable's ridiculous pricing. For example, Marcus recently defended his company's high prices by insisting Time Warner Cable is the Mercedes of video viewing options:

"There continues to be this perception that it is not a competitive market; that the market is not somehow working," Marcus says in an interview with Multichannel News. "Living in the world we do every day, competing for customers, that couldn’t be further from the truth. The best governor of pricing is an effective marketplace and we live in that world every day."

"...It can’t be the case that you can get for the really low price all of the great attributes in the products that you can at the higher-end prices. There is always going to be the Hyundai and the Mercedes."

Here's the problem with Time Warner Cable claiming high prices are all you need to claim you offer a luxury service: Time Warner Cable is literally the least liked company in any industry in America, with arguably the worst customer service in the country. Of course, it's not particularly surprising that a guy who is about to personally make $85 million from Charter's acquisition of Time Warner Cable isn't particularly in-tune with the value-needs of his typical customer, but executives like Marcus are going to have to pull their collective heads of of the sand post haste if they want to minimize the impact of the Internet video revolution, and the cheaper, more flexible channel options they insist nobody wants.

Filed Under: bundles, cable tv, pricing, robert marcus
Companies: time warner cable