Time Warner to cut costly channels with low ratings
The amount of money the cable company pays to content providers is "out of whack," says CEO Glenn Britt.
AMC (AMCX), for example, is now engaged in fierce contract re-negotiations with Verizon (VZ), and has warned that Verizon customers might soon lose its channels. Over the summer, DirecTV (DTV) and Viacom (VIAB) also had a contractual skirmish that resulted in a 10-day blackout of Viacom channels for DirecTV customers before a carriage deal was reached.
Indeed, pay TV operators have become more and more vocal with their complaints about how programming costs have become increasingly expensive.
Last month, DirecTV CEO Mike White said in an earnings call, "I think we're going to continue to see very, very tough discussions by all distributors with content providers, to try and mitigate these outrageous cost increases that are unaffordable to the average customer."
The latest to fire a salvo is Time Warner Cable (TWC) CEO Glenn Britt. Speaking at the UBS 40th Annual Global Media and Communications Conference, Britt said, "We're going to take a hard look at each service, and those services that cost too much relative to the viewership, we’re going to drop them."
Britt noted that since 2008, Time Warner's programming cost per customer has increased by more than 30%, while the prices it charges video customers have only gone up 15%. The amount of money his company paid to Hollywood giants was "out of whack," he said.
"If you have a network that has hashmark ratings [low audiences] and isn't going anywhere, we're going to have a different conversation" when Time Warner renegotiates contracts after the current ones expire, compared to those "we had with them five, six, or 10 years ago," added Britt.
Cable TV operators have struggled with cord-cutting in recent years, with anemic growth in the market as customers turn to the likes of Netflix (NFLX) and YouTube (GOOG). In the third quarter of 2012, the cable TV industry as a whole lost 127,000 subscribers.
Britt said that cord-cutting "appears to be fairly minor at the moment," but nonetheless said that to the extent that it is happening, some of the blame has to go to content providers. "Programming and packages keep getting more and more expensive. This stuff is just starting to cost too much," he said. "It's out of touch with consumers. It can't continue that way for another 10 or 20 years."
At the start of the year, Time Warner engaged in its own fierce dispute with the MSG Network (MSG) over high costs, but the cable giant eventually relented after Jeremy Lin reignited fan fervor over the New York Knicks.
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Time Warmer, Verizon, Direct TV and Dish and all other cable operators should be very hard on these cable channels and on how much they will pay for content. I don't like to pay for each channel on a individual basis just because it is on the cable. I never watch ESPN so I don't need it or 10 golf channels on my set . I have Verizon and have hundreds of channels and most of them I never watch but they cost me money monthly.
I say if the providers want to jack up the fee 20 or 30% just dump them.
Give me an option to eliminate the SPORTS channels, the SPANISH language channels, the MUSIC VIDEO channels and I'll be a happier subscriber, with more money left in my pocket at the end of the month.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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