Offering Everything From Lower Prices to Expanded Choice, They Aim to Please

By Danny King, Special to TelevisionWeek

If a Comcast customer is unaware of a high-definition video-on-demand programming inventory that has grown fivefold since the beginning of the year, don’t blame the company.

“If they’re buying an HDTV, they’re most likely going to access VOD,” said Derek Harrar, Comcast’s senior VP and general manager of video services. “And we promote the bejesus out of it.”

Whereas satellite leaders DirecTV and Dish Networks have been playing a game of “top this” by periodically announcing another batch of linear HD channels available to customers, cable companies’ efforts to capitalize on the high-definition television boom have been as varied as the geographic regions they cover.

Hamstrung by bandwidth limitations that don’t apply as much to satellite providers and upstart telecommunications TV services like Verizon’s FiOS and AT&T’s U-verse, cable companies, whose services are used by about 60% of U.S. households, have preached features like video-on-demand choices and lower prices to lure HDTV owners or keep them from jumping ship.

Comcast, whose 24.4 million customers make it the largest U.S. cable service, has been the most aggressive at pitching its HD services. With about 40 linear HD channels—less than half what DirecTV and Dish offer—Comcast said in January that it would give its subscribers 1,000 HD “choices”—i.e., film and television titles on VOD, linear HD channels and music videos—by the end of the year. In October, the company said it reached that goal more than two months early.

Taking a different approach, Time Warner Cable, whose 45 HD channels put it slightly ahead of Comcast but whose 300 VOD titles in HD lag Comcast’s inventory, calls itself “Home of Free HD.” With more than 13 million cable customers, the No. 2 U.S. cable company has been highlighting how satellite operators charge subscribers with lower-priced packages about $10 a month for HD service, while TWC’s HD service is free of charge.

“We are successfully rolling out switched digital video across our footprint and have been expanding our HD options every week,” said Robyn Watson, spokeswoman for Time Warner Cable. “More important, it’s the channels our customers are telling us are most important and that they are the ones they want to watch.”

Meanwhile, smaller cable companies like Cox Communications and Charter Communications have been playing catch-up. Cox, which has about 6 million cable subscribers, has announced institutional agreements since June involving providing high-definition video-on-demand at Las Vegas’ Encore at Wynn and being the video provider at colleges such as the University of Florida.

Charter, whose 5 million-plus subscribers make it the No. 4 U.S. cable company, in August publicized an agreement to show Summer Olympics VOD programming in HD that was similar to Comcast’s. The company has as many as 40 linear HD channels in some markets and 350 VOD choices in HD, according to Charter spokeswoman Anita Lamont.

“While those of us in the industry think consumers are counting the number of HD channels, the reality is they just want to stay with what they’ve got,” said Bruce Leichtman, president of Leichtman Research Group. “So the messaging is much more about retention, saying, ‘Just stay with us and you’re fine.”

At stake are a growing number of U.S. households that have purchased HDTVs to take advantage of visually clearer technology while ensuring broadcast viewing after the U.S. switches over to all-digital broadcasts in February. By next year, almost 40% of North American households will own a 1080p, or so-called “true HD,” TV, up from just 18% last year, NPD Group unit DisplaySearch said in September. As a result, the number of satellite and cable subscribers receiving HD from their multichannel service operators doubled last year to about 24 million and may double again this year.

Whether the HD pitching strategies have worked remains in question. Comcast last week said it boosted the number of digital cable customers with either HDTV or digital video recorder service during the third quarter by about 300,000 to 7.3 million. And while Time Warner Cable said its digital video subscriber base during the quarter expanded 1.5% to 8.61 million customers, it didn’t disclose how many were receiving HD or DVR service.

Still, cable companies have had to gird themselves not only against DirecTV and Dish, which have more than 30 million subscribers combined, but also against telecommunications giants that have launched their own television services within the past three years.

Competitors Are Growing

Last month, AT&T and Verizon, the two largest U.S. phone companies, said their respective U-verse and FiOS services accelerated their combined third-quarter customer growth by adding 465,000 subscribers, up from a combined 346,000 in the second quarter. FiOS’ 100 HD linear channels and 800 VOD choices in HD appear to allow it to go toe-to-toe with both DirecTV and Comcast from a content standpoint, while U-verse’s 75 HD channels also trump the cable companies’ selection.

Such competition only figures to increase. Between now and 2013, the number of U.S. cable subscribers will be little changed, at about 64 million, while the satellite subscriber base will expand about 8% to 33.4 million, consultant SNL Kagan said last month. During the same period, the number of telco video subscribers will jump fivefold to more than 11 million, SNL Kagan said.

Still, as home sales slow and people cut back on spending, cable consumers are likely to give cable companies more time to increase their HD inventory toward the levels of their satellite or telecommunications competitors before taking the time and money to switch over, Sanford C. Bernstein analyst Craig Moffett wrote in a note to analysts last month.

“No company is ‘recession-proof,’” Mr. Moffett wrote. “Cable may be as close as you can get.”

Multiple Choice: Derek Harrar

Comcast Reaches HD Goal Early

By Danny King, TelevisionWeek

When DirecTV said in January that it would have 100 high-definition channels by 2009, Comcast chief Brian Roberts returned the U.S. satellite leader’s salvo by saying its 25 million cable customers would have access to more than 1,000 HD “choices”—i.e., combined video-on-demand titles and linear channels—by the end of this year, up fivefold from last year.

Charged with getting the largest U.S. cable company to keep this promise, former investment banker Derek Harrar, the company’s senior VP and general manager of video services, helped it reach the goal—which includes providing more than 200 HD movies and 300 HD TV shows on-demand —more than two months early. He recently talked to TelevisionWeek correspondent Danny King about the experience.

TelevisionWeek: How does reaching your January goal of 1,000 HD choices by year-end position you as far as HD inventory among other multichannel service operators like satellite and telecommunications companies?

Derek Harrar: We’re probably the only service provider to deliver on that promise in content, and we’re pretty happy about that. We have a little over 200 high-def movies. If you were sitting on your sofa and watched them end to end, you’d be sitting there for two weeks. That’s a lot of movies. We wanted to come up with something fun and exciting and really stress things that are relevant to the consumer.

TVWeek: What are your customers watching on video-on-demand?

Mr. Harrar: When we originally launched on-demand programming, we’d really see high usage in the action genre. Over time, romantic comedies have picked up a lot, though with HD it still tends to skew toward the action side. But for instance, with “Mad Men,” we’ve seen about a third of the views show up in hi-def. That’s a high-water mark for us. When we do promotional stunts—we did one with gangster movies like “The Godfather” and “A Bronx Tale”—we usually see 20% to 25% show up in HD, but we’ll get about 30% for “The Tudors” on Showtime.

We’re looking at where the usage is going to be and how the content’s going to be relevant. A really good example is that we don’t have any children’s content in hi-def. The reality is that when we put on children’s shows, the usage just isn’t there. … But overall, usage in hi-def is about two and a half times what it was last year.

TVWeek: In the third quarter, Comcast boosted the number of subscribers who received either high-definition or digital video recorder services by 4.3%, compared with a 2.6% increase in overall digital cable subscribers. How much of this do you think has to do with the increased HD VOD offering?

Mr. Harrar: Something in the range of 70% of our set-top owners have used on-demand. The hi-def customer tends to be a little more savvy about the merits of time-shifting, and on-demand is time-shifting technology that resonates with them.

TVWeek: Some analysts have said Comcast had to expand its VOD inventory in HD to be competitive simply because cable companies don’t have the bandwidth to match linear HD channels with satellite and telco services. What’s your response to this, and how many linear high-definition channels does Comcast provide?

Mr. Harrar: It depends on the market, but it’s kind of in the 30 to 50 range. But here’s how we look at it—we’re very focused on where the usage is. If you ask customers if they’d rather watch the content live or on their schedule, four out of five would rather watch on their schedule. Customers would rather watch roughly two-thirds of TV shows, and even about 20% of sports events, on their schedule.

Look, the first thing that we think about is what’s important to our customers. That’s why we go with the content strategy we have. We’re doing 300 million views, or about 150 million hours, of VOD every month. … We know we have the perfect strategy because we know the usage is there.

TVWeek: AT&T and Verizon added almost 500,000 customers for their U-verse and FiOS services. Is there concern about losing customers to them?

Mr. Harrar: You have new competitors coming into an existing space, and those are certainly ones that have some scale and resources. We’re all over it. We’re very focused on retention programs for customers, but the most important thing from a product perspective is to have the best services. And if you compare our HD offering to theirs, there’s just no comparison.

Price Conscious: TW Cable Touts ‘Free’

Increasingly Aggressive Promo Effort Pays Off

By Danny King, Special to TelevisionWeek

Amid the economic downturn, Time Warner Cable has stepped up promotion of its high-definition television service by highlighting its price—or lack thereof.

“Time Warner Cable is the home of free HD,” said spokeswoman Robyn Watson. “This is consistently the driver of customer acquisition, since most competitors charge for even the basic HD channels. We don’t understand why some operators charge customers twice for the same programming they are already providing.”

Whether the effort is a case of “better late than never” is a question analysts who cover multichannel service operators have been asking all year. While Comcast was pushing its “1,000 choices” campaign and DirecTV and Dish were publicizing their race toward 100 HD linear channels, some analysts covering Time Warner Cable said midyear that it was missing a marketing opportunity by not promoting its HD inventory as aggressively as its competitors did.

Since then, though, TWC, whose 13.3 million third-quarter cable subscribers trail only Comcast’s 24.4 million among U.S. cable companies, appears to have stepped up the effort. That includes bright orange linkable Time Warner Cable advertisements on Web portals like Yahoo that highlight “Free HDTV and DVR service.”

TWC last month responded to Verizon’s recent marketing blitz for its FiOS service in New York City by sending out mailers promoting its triple-play package, which bundles video, high-speed Internet and phone services. Pali Research analyst Rich Greenfield praised TWC’s move in a note to clients late last month, but added the effort came “52 months later” than Long Island’s Cablevision started using the same strategy to attract customers.

Still, TWC, whose majority owner Time Warner Inc. said in May that it would divest the company, may have further marketing opportunities as its technological investments clear the bandwidth necessary to expand its HD linear channel selection beyond its current inventory, Sanford C. Bernstein analyst Craig Moffett wrote last week. TWC’s 45 HD channels is about equal to Comcast, though about half what Dish, DirecTV and FiOS offer.

“Time Warner Cable has been somewhat more aggressive with technology initiatives like Switched Digital Video, leaving their physical plant in a somewhat better state of readiness than Comcast’s,” Mr. Moffett, who covers both, wrote to clients.

HD Spurs Cable’s Own Switchover

By Danny King, TelevisionWeek

Out with the old, in with the new.

That’s what cable companies will need to do over the next few years to increase the bandwidth necessary for more high-definition channels and video-on-demand choices in their effort to keep up with satellite and telecommunications companies’ HDTV services.

Comcast and Time Warner Cable will try to clear airspace for HD programming by converting analog cable subscribers to digital. Converting enough subs to eliminate analog use in some markets would allow cable companies to “reclaim” some analog channels.

For each analog channel reclaimed, a cable company could add as many as 12 standard-definition digital channels or up to three HD channels, says Ian Olgeirson, senior analyst at research firm SNL Kagan.

So far, cable companies are making progress. In the third quarter, Comcast cut the number of analog subscribers as a percentage of total cable customers to 31% from 40% a year earlier, while TWC reduced its analog subscriber percentage to 35% from 41%, the companies said last week.

Comcast is doing this by converting “millions and millions” of customers in its second-lowest-priced analog tier to digital by giving them a set-top box and access to more linear channels and video-on-demand without changing their monthly subscription fees, said Derek Harrar, senior VP and general manager of video services.

“We’re taking price off the table,” he said. “It’s not about, ‘Hey, upgrade and pay us more.’ It’s a great deal for you because it’ll cost you nothing.”

Cable companies also may ease the process of HD channel expansion by distributing more MPEG-4 set-top boxes to subs, possibly by introducing new HD subscription tiers. Compared with MPEG-2 boxes, which were distributed as far back as a decade ago, MPEG-4 boxes can process twice the information in the same-size digital stream, Mr. Olgeirson said. Adding switched-digital video to their operations also may give cablers more room for HD content.

“The cable companies have tools at their disposal for increasing the amount of space they can devote toward HD,” he said. “It just depends on what tools they utilize to create that space.”

Time Warner San Diego is considering to eliminate Expanded Basic to digital in February but thats just a rumor. I'm sure they will distribute a terapix device or just get some cheap DTA's.

A really good example is that we don’t have any children’s content in hi-def.

And yet Comcast has a Nickelodeon "HD" section with upconverted programming. In fact, a lot of their supposed 1000 HD "choices" are upconverted SD. No wonder they met their goal two months early.