MikeM54321 ...a few reasons why MSO's are moving to digital
broadcast connecting settop boxes to your TV:
From Cable World....
Tiers of Happiness for MSOs
by K.C. Neel
The rollout of digital services is taking the cable industry by storm these days. But MSOs are beginning to take diametrically opposing approaches to marketing the service.
While Comcast is adding 33 channels of programming to its lineup for an extra $5 a month, Adelphia is giving away its digital tier to multipay customers.
Both moves are big departures from previous marketing efforts by the MSOs. Adelphia has counted on the revenue from its digital tiers to goose its bottom line numbers. Comcast has eschewed the slew of new digital networks, relying instead on multiplexed pay services and pay-per-view channels to fill its digital tier.
"Our research shows people want more viewing options," says Comcast Cable president Steve Burke.
At a time when digital packages are flooding MSOs’ coffers with close to $50 million in additional revenue each month, Adelphia’s decision to give the service away is a bold move that has some observers scratching their heads.
Adelphia CFO Tim Rigas says it’s a natural progression. He’s seen too many subscribers defect to DBS in recent years, and he wants to use digital as a retention tool for his best customers.
Rigas admits Adelphia could lose some incremental cash flow in the beginning. Yet in the long run, he figures the company will come out ahead financially and make customers happier at the same time.
The way he sees it, basic customers will be more likely to upgrade their service if they know they’re going to be getting more for their money.
While he believes upgrades and retention are good reasons to switch digital marketing strategies, his real goal is to increase penetration of digital boxes. He thinks video-on-demand and interactivity will drive revenues in the future, not just monthly revenue from some additional programming services.
"In the next three years," Rigas says, "we think we’ll have a 50% digital box penetration rate. At that rate, we expect to be getting between $40 and $50 per customer in revenue from digital services alone."
Meanwhile, Comcast is reconfiguring its digital tier in a way that company executives hope will accelerate additional revenue.
Until now, Comcast’s digital tier has been made up of multiplex pay, PPV, digital audio and an interactive guide for $9.95 a month. The company is expanding that service to include 33 more networks such as nine channels from MTV Networks, Weatherscan Local from the Weather Channel; six services from Discovery Networks; and 13 Encore channels.
"Our package has been heavily aimed at our pay customers until now," says Comcast VP-marketing Andy Adis. "We waited to launch digi-services, so we could gain some leverage and cut better carriage deals. But we’re now at the point where we see a major opportunity to continue the momentum with our basic customers."
Comcast is reconfiguring all its tiers now. The company is eliminating its analog tiers and will repackage its expanded analog tier to include those analog services, Adis says.
The company will also phase out its $10.95 package, although existing digital customers won’t be forced to take the $14.95 service unless they want it. |
