So maybe cord-cutting isn’t imaginary after all.
Time Warner Cable (NYSE: TWC) is testing a discounted tier of channels in select markets next month, The Wall Street Journal reported.
The catch: Major networks like ESPN (NYSE: DIS) and Comedy Central won’t be part of this TV Essentials package, which will be steeply discounted to just $30-40 in New York City, Cleveland and Akron, Ohio.
TWC CEO Glenn Britt positioned the experimental product as an alternative for customers too impacted by the recession to afford full-on cable TV. But he’s likely responding just as much to the near-daily accumulation of data suggesting cable operators like TWC are losing subscribers at rates like they’ve never seen in the industry’s history. And then there’s the new breed of over-the-top products from Apple (NSDQ: AAPL) TV to Boxee that may or may not be pulling away those subscribers, depending on which analyst you care to believe.
Essentials shouldn’t come as a surprise to anyone who has listened to Britt’s public comments over the past year. He has floated the possibility of just such an experiment on more than one occasion. TWC had been seeking the flexibility in its affiliate deals to make such a move, though it’s unclear if in success that Essentials could be deployed across TWC’s footprint.
The yanking of ESPN, as well as Fox regional sports networks and MSG, was to be expected given they are typically far and away the most expensive channels for cable operators. WSJ also indicated that 24-hour news channels Fox News and MSNBC (NYSE: GE) will be removed from the Essentials package. Other limitations: no DVR or high-definition channels.
Bernstein Research weighed in on TWC’s move earlier in the day: “For distributors and Time Warner (NYSE: TWX) Cable specifically, this is an equally important development, in as much as it allows them to offer a package directly aimed at combating cord-cutting at the low-end. An enormous body of evidence suggests that cord-cutting remains primarily a low-end phenomenon, more typically a result of poverty than of Internet choice and convenience.”