Image Problem

Cable World, June 9, 2003

What if an industry spent $70 billion upgrading its services and nobody noticed?

It may not be quite that bad, but the cable industry most assuredly continues to suffer an image problem. According to a telephone survey of 502 consumers conducted late last month for Cable World by Talmey-Drake Research & Strategy Inc. in Boulder, Colo., 37% of the cable industry's customers think cable rates are "way too high," a majority believe cable represents a fair or poor value and a plurality say cable service has either not changed or has deteriorated. This while the industry has rolled out the most impressive array of new and advanced services ever seen in the media business.

Granted, the news in the survey is not all bad. For instance, 10% of the sample said cable represents an excellent value, up from only 6% when the same question was asked in 2000. Consumers are quite pleased with cable high-speed data service. And of those who have access to video-on-demand services, 63% said they were "very satisfied."

Following are some highlights of the survey, with commentary from Bob Drake, partner at Talmey-Drake.

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Cable companies have all kinds of value, yet perceived value remains the same (Question 3).

"The most serious problem the cable companies continue to face involves rates and value, and what I would term the 'rebuild value gap.' The cable companies have added hundreds of channels, upgraded their systems for high-speed data and new service like digital cable and SVOD and have understandably raised their rates to pay for the added value they are providing their customers. The problem is, there is a serious gap between what the cable companies think they have added in value for their customers and what the customers themselves feel they are getting in return."

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Rates being "way too high" remains in the upper 30% (Q5).

"The bottom line is that for cable customers, the feeling that rates are 'way too high' is at the second-highest level since Cable World and Talmey-Drake first started surveying back in 1989, when that perception was a mere 17%. It now rests at 37%, down only 2% from its high in the year 2000.

What I find astounding is that only 13% of cable customers even know that cable companies have to pay programmers in order to include their programming. Focus groups have shown that as far as the customer is concerned, the cable companies are simply pocketing all of their monthly fees as profits. The cable companies will never solve their value problem till customers understand that their monthly bills are paying for programming, not just profits!"

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Only 9% of people say that the cable rep who visited their home tried to sell them something (Q6e).

"What a lost opportunity. It's like the Avon salesman arriving at the door, admiring the carpet, then leaving without a sales pitch."

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Only 36% of customers know about the on-time guarantee, while service reps show up on time over 80% of the time (Q6b & c).

"One of the most successful customer service initiatives ever undertaken by cable MSOs has been the on-time guarantee program. Yet the cable companies are getting little credit for it because few customers are even made aware of the guarantee. Cable customers should be so aware of the guarantee that they are hoping and praying the cable rep will be late so that they will get a free install or repair out of it. It is far better to disappoint them by your success than by your failure."

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Interest in digital remains strong, even though four times as many people have it now than did in 2000 (Q12a, 12b & Q16b).

"Cable companies should continue hyping digital cable. Not only is interest as strong today as it was in 2000, but it is also a great defense mechanism against the Darth Dish. Almost three times as many digital customers said they are less likely to switch to a DBS system now that they have digital."

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The number of high-speed data customers has gone up, but interest has leveled off (Q17b & 17h).

"While users of high-speed access have tripled over the past three years, interest levels have dropped in half. If cable companies want to capture much of the remaining dial-up dinosaurs, they will have to market a high-speed 'lite' product to get customers over the $50 barrier they now face."

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The sports tier: Sports fans will be ticked (Q18 & 19).

"When it comes to sports tiering, there is a divide between sports fans and nonsports fans that is big enough for Moses and his legions to pass through without trepidation. Those 42% of customers who are not sports fans overwhelmingly want to get out from under the sports programming burden, with 64% saying a sports tier is a 'good idea,' and just 16% willing to sign up for a sports tier for between $2 and $4 a month. On the other hand, the sporting crowd clearly can do the math. A hefty 68% of sports fans think paying extra for a sports tier is a 'bad idea,' though 50% say they are willing to pay extra for it if they have to."

METHODOLOGY

The 2003 Cable World National Issues Survey was conducted by Talmey-Drake Research & Strategy Inc., a public opinion and market research firm in Boulder, Colo. The results of this survey are based on 502 random telephone interviews with cable customers nationwide, conducted between May 23 and May 28, 2003. Talmey-Drake purchased a list of cable customer telephone numbers from Survey Sampling, which was then randomly sampled. Quotas were established to obtain an equal representation of men and women. A random sample of 502 has a worst case, 95% confidence interval of plus or minus 4.4% about any one reported percentage.