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Selling Cable in the Land of Rabbit Ears

Cable World, Dec 16, 2002

Byline: JON LAFAYETTE

Minneapolis is a tough place to sell television.

You would think the snow and cold weather would drive Minneapolitans indoors where they could warm themselves by the glow of the boob tube. But you'd be wrong, according to Eric Brown, president of Time Warner Cable's Minneapolis division.

"People here don't let the winter get in the way of being active," Brown said.

That translates into relatively low penetration for pay television. Combined penetration for cable and satellite TV is just 54%, far lower than the national average.

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"My neighbors take pride in having only one TV in their house and having rabbit ears on it," said Brown. People there don't talk about The Sopranos or The West Wing, he said. Instead, they're very involved in community activities. "You hear them talking about their kids and the Lutheran Circle," Brown said. "TV is not the centerpiece of their lifestyle."

The family-oriented nature of the market "has a very definite impact on how people view technology and what their appetites are for entertainment and communications services," Brown said.

Fortunately for Time Warner Cable, while Minneapolis is traditional and family-oriented, it's also an upscale market in which high-speed Internet access is an easy sell.

"We do recognize that high-speed data is our growth engine, and we focus on growing our penetration there," Brown said. "About 25% of our customers have high-speed access, and it's growing every month."

Brown arrived in the market about a year ago from Los Angeles, which is a bit warmer. "It's been an absolutely delightful transition," he said. "The Twin Cities are very cosmopolitan. It's much more diverse than I was expecting, particularly in the city, which is our service area."

The city is the home for several major corporations, including Best Buy, ADC, 3M, American Express's IDS division, Target and Northwest Airlines.

"There is a very healthy corporate community," Brown said. "That makes for a community with a high level of education, a lot of dual-income families."

These are the folks scarfing high-speed service. Time Warner has offered Road Runner since 2000 and is now a multiple-ISP provider, with Earthlink, America Online, Max.Inter.net and BigNot available.

Still, Time Warner needs to sell its video products and has been refining new strategies to do that. In a market like Minneapolis, where television is deemed less crucial to one's existence than in the rest of the country, hawking hundreds of channels might not be the best approach.

"We know that if we go to someone and start the conversation with a digital offering of over 300 channels, they're immediately overwhelmed," Brown said. Many of these customers are what Time Warner calls cable resistors. Their unwillingness to subscribe isn't about money - it's about them not feeling they need cable in their life, he said.

Time Warner's goal is to sign up residents for basic reception service as a way to get into the home and establish a business relationship. With the proverbial foot in the door, Time Warner can start working on upgrades. And while a multitude of channels may not be attractive to viewers in Minneapolis, Brown expects video-on-demand will be.

"People here are very receptive to the concept of what I want, when I want," he said. While potential subscribers say "a lot of what you have I'm not interested in," they also say "if you had what I wanted and it was convenient, yeah, I'd be interested."

Last month, Time Warner began pushing VOD aggressively, running commercials on broadcast TV and ads in newspapers and in some minority publications, because African-Americans in particular are above-average consumers of these services, Brown said. The ads proclaim: "Now you can control your own viewing." Time Warner has also been demonstrating the product at local retailers to create a buzz.

So far, the results have been encouraging.

"We've been very pleased. We see growth in usage every single week," Brown said. In October, 40% of Time Warner's addressable customer base used VOD, a number he put in the thousands. At first the activity was driven by movies on demand, with 70% of PPV movie buys done through VOD. But the system has also begun offering basic cable network programming at no charge to get people into the habit of "doing the transaction." HBO and Showtime on-demand packages are also being offered.

The Minneapolis market is still recovering from Sept. 11, which hit Northwest Airlines particularly hard during last year's fourth quarter and this year's first quarter, when the airline began rehiring some of its laid-off workers. Since April, Brown said, "we're seeing a return to normal business levels."

Time Warner also encountered some disruptions as it completed the rebuild of its plant last year and focused on getting reliability back where it had been and improving service delivery levels.

Technology Industry

Selling Cable in the Land of Rabbit Ears

Cable World, Dec 16, 2002

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