Cut-rate cable tiers: When all is lost, offer a (bad) deal to subs, hope cord cutting goes away

Jim O'NeillCharter Communications and Time Warner Cable are just about breaking their collective corporate arms as they pat themselves on the back celebrating their latest "this will save the cable industry," plan, their new "low-cost" cable packages.

TWC's "TV Essentials" is essentially a step back to the basic tier of old--local broadcast stations plus cable channels like A&E, AMC, Bravo, Cartoon, CNN, Disney, HGTV, Lifetime, MTV, a couple of gimmes to keep the subscribers happy. Subs also get two SD STBs, and video-on demand--sans any free content.

Want a little more retro? TWC's "TV Essentials" doesn't include anything but the basic video package, no Internet, no phone.

No kidding.

While the price in its two test markets, New York and northern Ohio--$40 and $30 respectively--sounds reasonable, it comes with the standard cable caveat: it's good for 12 months, after which it pops to $50 in both markets. TWC says it'll roll it out in other markets through 2011.

So, is this a package seriously designed, as TWC chief exec Glenn Britt says, with folks in economic distress in mind?

"We understand that people are under pretty serious economic duress and would like to have more choice and the option of paying for less programming," Britt said. "This video-only package isn't for everyone, but we hope that some of those most hard-hit by the current economic conditions find it to be a helpful option."

Really?

TWC's deal isn't really about keeping low-end subscribers, it's about poaching the low end of the satellite market, the Dish Network subs who can get a basic package for $25 a month (yes, for 12 months; then it pops to $40), but--NEWS FLASH--they also get a heck of a lot more than the TWC package has to offer, including the Holy Grail: ESPN.

It also isn't aimed at keeping potential cord cutters or cord shavers who, for economic reasons or just "because," are looking for ways to dial down or eliminate their cable bill. TWC's video-only package doesn't include Internet, so over-the-top goes out the window.

A game changer, it's not.

As for Charter, it doesn't actually have an offering--yet--but it wants to, so it can (hopefully) hang onto the subscribers it's been losing by the bucketful.

Charter is planning to roll out "a lower-tier, more economic package," as well, CEO Michael Lovett said. "We can go back to those households that are experiencing challenging times in this economy with something that would be better-suited for them--at least for this phase."

Lovett, like most cable execs, continues to blame the economy.

"If you look at unemployment rates today, we see people forgoing video entertainment in the household," Lovett said. "We don't see 'over-the-top' as a substitution long-term. We see a near-term impact relative to the economy on the video business."

Charter, by the way, saw a 5 percent decrease in TV subscribers in the third quarter, and said more is expected this quarter.

The new, cut-rate deals cable companies are offering isn't the solution to the market erosion the cable industry has been suffering since 2008. Its market share has contracted from some 66.2 percent in 2Q08, to 60.3 percent in 3Q10, while satellite and Telco TV offerings have grown (1.5 percent and 4.3 percent respectively), according to SNL Kagan.

The cable industry is suffering from a much larger malady, the 10 consecutive quarters of subscriber losses is just a symptom, and TWC, Charter and others, inevitably, are grasping at straws. The industry has trampled its customer base for years like a Tyrannosaurus rex run amok. The evolution of the pay-TV industry is wreaking havoc with cable, as satellite and Telco TV offerings relentlessly push it out of its ecosystem. It's a dinosaur and, just like that T-rex, is bound for the boneyard. -Jim

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