Online Porn Cutting into TWC VOD Revenue, but Mainstream Movie Streaming Isn’t Yet, Executives Say
The availability of free pornography on the Internet has hurt Time Warner Cable’s VOD sales, a drop that contributed to the company’s largely flat Q2 video revenue compared to a year earlier, company executives said during an earnings teleconference Thursday. About a third of the year-over-year drop in VOD sales was due to lower adult title revenue, said Rob Marcus, chief financial officer. The phenomenon isn’t new, said CEO Glenn Britt. “There has been a fairly steady trend on VOD for some time now for adult to go down, largely because there is that kind of material available on the Internet for free,” he said. Adult VOD is a “pretty high margin” business, Britt said, and the decline hasn’t been isolated to the second quarter.
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Mainstream movie VOD and pay-per-view events revenue was also down from a year earlier, Marcus said. But he didn’t attribute the drop in movie VOD sales to the rise in Netflix’s usage and popularity. It could also be a factor of the slate of new movies available, he said.
Asked three times by analysts about the company’s wireless strategy, Britt remained noncommittal. He said the company is exploring how it might bundle its wireline broadband product with a Wi-Fi and wireless service “at a single attractive price,” while preserving “optionality,” but didn’t provide many details. The company has been testing the theory that consumers might want a “quadruple play” of services from their cable operator but so far the evidence to support that theory hasn’t been very “exciting,” Britt said. “We're not really ready to say this is a non-starter,” he said. “Maybe we're just not doing it right. But we're also not ready to make huge additional bets."
TWC is under no obligations to invest further in Clearwire, Britt said, providing no more details. Of the company’s spectrum holdings through SpectrumCo, Britt said: “There’s a fairly long time period for buildout associated with that spectrum, despite some of the political comments people make around this in Washington.” TWC lost 130,000 video subscribers during the quarter, which typically is the slowest of the year. It added 54,000 broadband and 32,000 phone subscribers, it said. It also added 13,000 business-class phone and 13,000 business broadband accounts, it said. Total sales gained 4.4 percent from a year earlier on higher broadband and phone sales.
TWC is going to revamp some of its marketing, Marcus said. It has focused too much recently on marketing its three-product bundle, he said. “We probably didn’t take as much time and focus on the underlying virtues of the individual products that make up those bundles,” he said. That’s about to change, and TWC has a new chief marketing officer in place, he said.