Cable Industry Look To 'Millennials' To Sustain Video Business
May 22 2012 - 3:50PM
Dow Jones News
For cable companies looking for ways to sustain growth in their
maturing U.S. video businesses, young consumers like Diana Guay
Dixon may become the industry's biggest problem yet.
Annoyed by a costly monthly cable bill driven up by sports
channels she didn't watch, Dixon, 29 years old, canceled her cable
subscription with Cox Communications Inc. earlier this year. She
and her husband still rely on Cox for landline phone and broadband
service, but they now watch their favorite shows and movies through
subscriptions to Netflix Inc. (NFLX) and Hulu Plus.
"Once I realized that Netflix and Hulu Plus combined were
cheaper than cable, it was a no-brainer," Dixon said in an
interview over email. Hulu is owned by a consortium of investors
including News Corp. (NWS, NWSA), which owns this newswire.
Dixon is at the upper-end of the so-called "millennial"
generation of viewers broadly defined as those born between 1983
and 1997. Cable operators are looking for new ways to reach such
tech-saavy and budget-minded consumers like Dixon before they leave
home and consider "cutting the cord."
The industry's efforts include launching local, high-school
sports TV channels; promoting young-adult reality shows; and
customizing monthly bills for roommates. While millennials are
likely to opt for low-cost services from cable companies, they are
poised to become the industry's most lucrative subscribers as they
start their own families and grow their earnings power.
"They are worth less now but [they] will ultimately become our
best customers if we treat them right," said Peter Stern, chief
strategy officer at Time Warner Cable Inc. (TWC).
Cable operators already face real hurdles to growing their
video-subscription businesses, where they have lost millions of
video customers in recent years, due in part to rival services like
Verizon Wireless's FiOS service or AT&T's (T) U-Verse.
And while there's little definitive evidence that cable
operators are already losing subscribers to cord-cutting, research
suggests it will become a bigger problem for the industry going
forward.
A survey by Deloitte earlier this year found that 19% of young
millennials were considering canceling their paid-TV service on the
premise that they could watch all of their favorite shows online
for free--a sentiment shared by only 7% of their parents. More than
a third of millennials said they had watched a favorite show in the
past six months over a free Internet site, a percentage twice as
high as their parents.
Comcast Corp. (CMCSA, CMCSK), which is the country's largest
cable operator by subscribers, has in recent years sought out new
young subscribers through marketing efforts like giving away
packing boxes and laptop sleeves at large universities.
In addition to promoting services through contests advertised on
Facebook Inc. (FB), the Philadelphia-based company also has
promoted original-content series like "Jump Shipp," a reality TV
series about avoiding the pitfalls of an unsatisfying first job and
a "quarter-life crisis," produced by Halogen TV.
Millennials "are the sweet spot of what media is trying to
reach," said Marcien Jenckes, a senior vice president at Comcast
who heads the company's video division. "We have to go to school on
the ways consumers expect to get their content."
Meanwhile, Cablevision Systems Corp. (CVC) has launched a local
high-school sports and school events network, "MSG Varsity," aimed
at attracting millennial viewers at 600 high schools in its service
areas. Coverage on "MSG Varsity," the name reflects Cablevision's
ties to Madison Square Garden Co. (MSG), includes school games,
academic events and other student-produced content.
Rather than focus on content and marketing efforts, Time Warner
Cable is experimenting with new ways to charge and service
budget-minded millennial consumers. Those efforts include seeking
ways to split a monthly cable bill between multiple roommates,
offer lower-priced service for budget-conscious viewers and provide
pre-wired service in college apartments.
The major cable operators point to their efforts to expand
over-the-top viewing options as a response to the millennial
generation's increased demand for mobile and Web-based viewing
access.
A consortium of big cable companies including Comcast, Time
Warner Cable and Cablevision Monday announced a new agreement
through which they share access to around 50,000 wireless hotspots.
Comcast also introduced new services Tuesday for its Xfinity voice
subscribers that allow them to make calls and texts over wireless
data networks at home and at wi-fi hotspots for free.
Cablevision, meanwhile, has aggressively rolled out its offering
of on-demand video and "TV To Go" services that allow subscribers
to access content on Microsoft Corp.'s (MSFT) Xbox, tablets and
other devices.
Earlier this year, Comcast and Walt Disney Co. (DIS) struck a
wide-ranging deal allowing Comcast to lock in prices and distribute
Disney brands, including ABC Family and the Disney Channel on box
tops and over-the-top devices.
One hurdle for cable operators remains finding ways to
incorporate advertising revenue into the over-the-top viewing
habits of millennial viewers. Such concerns have been highlighted
of late by the launch of new ad-skipping technology from
satellite-TV operator Dish Network Corp. (DISH), which broadcast
executives have said could result in higher programming fees if
advertisers are cut out of the viewing experience.
"Whatever consumer experience there is, we have to make sure
there are ways for the networks to monetize it," Jenckes said.
-By William Launder, Dow Jones Newswires; 212-416-3412;
william.launder@dowjones.com
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