Time Warner Cable to Test Recession Package

Budget program package to exclude ESPN and other networks that fetch high carriage fees

NEW YORK - Time Warner Cable will launch a budget-priced cable TV package in a couple of test markets that will likely include all broadcast networks and local stations, but exclude higher-priced cable networks, CFO Rob Marcus said at an investor conference Thursday.

The company has previously said that it is eyeing such an offer amid losses of lower-end subscribers, which management has attributed to the weak economy. Observers see it as a way to potentially address investor fears about cord cutting after SNL Kagan on Wednesday reported the second consecutive quarter of TV multichannel subscribers in a row.

"For distributors and Time Warner Cable specifically, this is an equally important development, in as much as it allows them to offer a package directly aimed at combating cord cutting at the low-end," said Sanford C. Bernstein analyst Craig Moffett.

Marcus didn't detail which networks will be excluded, but analysts have suggested the new package would likely exclude expensive sports channels. Indeed, the Wall Street Journal said on its web site Thursday afternoon that the likes of ESPN, Fox regional sports networks, Comedy Central, TNT, Fox News, MSNBC and MSG will be excluded from the package called "TV Essentials." Research firm SNL Kagan has estimated ESPN's 2010 average monthly network subscriber fee to be $4.40.

A test for the package will launch in New York Monday for $39.99 per month in a 12-month promotion. In Northern Ohio, including Cleveland and Akron, the product will launch in early December and cost $29.99 per month. TW Cable said the value of the package is $49.99.

"This represents a substantial discount to existing introductory plans, roughly between today's Broadcast Basic packages (ranging from $10 to $15) and fully Expanded Basic packages," said Moffett. According to TW Cable, the cost for expanded basic service varies by market, but costs $46.40 in Southern Manhattan.

But in a possible nod to content companies, which generally prefer carriage of a broad range of their networks, TW Cable emphasized that the new package won't be for everyone and that it will include at least some channels from major companies. In the past, packages with limited channel selections have also not gained much traction with consumers. Marcus said at the Deutsche Bank Media & Telecom conference that the new offer is for people who are having "a tough time making ends meet," but he also signalled that more lower-end packages may be in the works.

Asked about cord cutting fear, he said he feels it is "not a  meaningful phenomenon" so far.  

"The TV Essentials package is a critical step in addressing the needs of lower-end video subscribers, and represents an extraordinary compromise between content owners and distributors," said Moffett, who highlighted that "any lower-priced, "lighter" package like TV Essentials can only be offered with the cooperation and consent of content providers who are increasingly wedded to full distribution of all of their cable channels." In agreeing to support a package at such a low price point, "the media companies appear to be acknowledging the importance of lower-priced offerings to maintain relevance to lower-end customers," Moffett said.

It remains to be seen whether other cable operators will also put together budget offers. But Cablevision Systems officials recently said that may be tough given the way the firm's content deals with network owners are structured.
 

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