Time Warner Cable (s TWC) made headlines this week as it announced plans to roll out a new, lower-priced cable package it hopes will slow the number of customers dropping their cable packages or moving to other providers. But the new TV Essentials package, which it will test in parts of New York City and Northeast Ohio regions, is destined to fail because it doesn’t address the biggest single source of customer dissatisfaction: value, not price.
Like most cable companies, Time Warner Cable has blamed the rough economy for its subscriber woes, and the TV Essentials package is meant to target those customers who would otherwise stop paying for basic cable TV, simply because it’s gotten too expensive. The package, which will be offered for $49.95 a month, with a 12-month introductory rate of $39.95 a month in New York City and $29.95 in Ohio — as if that makes any sense whatsoever — is being offered as a way to entice customers who were paying upwards of $100 a month for cable to stay.
While the package is slightly cheaper than Time Warner Cable’s standard tier of pay TV services, at $50 a month versus $72 a month, customers lose a significant amount of programming, including cable networks like CNBC, Comedy Central, E!, ESPN, ESPN2, Food Network, MSNBC, MSG, SNY, SyFy, TLC, TNT, and YES Network according to BTIG Research. Not only that, but the TV Essentials Package can’t be bundled with high-speed Internet or phone services, and value-added features like HD and DVR aren’t available.
But if Time Warner Cable is trying to keep its subscribers with a $50 basic cable package that doesn’t include HD video, DVR, or the possibility of bundling service with broadband, it totally misunderstands why most of its customers are leaving in the first place — it’s not just the price of cable that is driving subscribers away, but the value of what they get for their money.
In a study of cable subscribers issued earlier this year, research firm Strategy Analytics found that “less than 22 percent of pay TV subscribers said their service exceeded or greatly exceeded their expectations of value for money.” The same study found that two-thirds of cable subscribers said they would switch providers if they could find cheaper services elsewhere.
But cheaper doesn’t always mean better, and Time Warner Cable’s cheaper TV Essentials plan is a step in the wrong direction from a value perspective. When one considers the amount of content, the quality of video and the flexibility of being able to view that video whenever one wants with a DVR, subscribers receive considerably less value for their money than if they stay with their current plans. That’s why we’re skeptical that such a plan will catch on, let alone thrive.
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