Cablevision to Experiment With Remote-Storage DVR Pricing, Products

Having introduced a remote-storage DVR (RS-DVR) in its New York City system, Cablevision executives are looking at new products and service offerings the technology will let them introduce, they told investors Wednesday. Because the technology allows any digital cable box to function as a DVR, with storage taken care of back at Cablevision’s facilities, there are many possible new products, they said. “We could do free previews of DVR service. We could do very limited storage and include that as part of another package,” said Chief Operating Officer Thomas Rutledge. “Or we could expand the storage and sell that as an incremental price opportunity. There are a variety of ways of looking at the DVR currently in the market, breaking it into various components and selling it for less or more depending on how you put it together."

One area of the RS-DVR where Cablevision lacks flexibility is in storing the shows its subscribers record. RS-DVRs can potentially save Cablevision money by eliminating the need to store multiple copies of the same program, but its contracts with TV programmers don’t allow that, Rutledge said. “We have not entered into single-copy contracts with programmers, but it is an opportunity for us and for programmers to use the RS-DVR technology more efficiently,” he said.

Additionally, Cablevision’s use of downloadable security is lowering the cost of the set-top boxes it buys to lease to subscribers by about $50 a box, Rutledge said. Were Cablevision to continue buying the same kinds of boxes it does now, with no new capabilities, the total cost of a box could be close to $50, he said. “The issue is what kind of boxes we buy,” he said without discussing what types of capabilities new boxes could have. Still, the advent of TV sets with built-in processors could reduce the need for Cablevision to buy set-top boxes, he said. “Because we've now put our whole product in IP for in-home distribution, we have the ability to serve TVs without set-top boxes,” he said. However, he said he expects Cablevision to continue buying set-top boxes for years to come.

Cablevision’s retransmission consent dispute with Fox during Q4 caused its weak video subscriber performance during the quarter, Rutledge said. Cablevision lost 35,000 video subscribers during the quarter, after factoring out its gains associated with acquiring Bresnan’s cable systems. “We were faced with a take-it-or-leave-it situation,” he said. “And we got significantly lower programming costs as a result of it. We thought taking the hit was worth it, but we think it was a one-time hit,” he said. The dispute was also a drain on Cablevision’s marketing budget, he said. “We were spending a lot of money on marketing, buying full-page newspaper ads and alerting our customers,” he said. As a result, Cablevision drowned out its normal marketing and was less successful attracting new customers, he said.

Those quarterly subscriber losses were Cablevision’s worst since Verizon introduced its FiOS TV service, Sanford Bernstein analyst Craig Moffett wrote in a note to investors. “More ominously, broadband hit a wall, adding only 6K subscribers, down sharply versus last year and well below the 26K consensus,” he said. “The weakness in subscriber metrics in the core Cable business … gives more than enough reason for pause,” Moffett said. “We continue to see Cablevision as a very good asset, but one that is now approximately fully valued."

Q4 sales at Cablevision gained 5.7 percent from a year earlier to $1.87 billion, reflecting some gains from closing its acquisition of Bresnan in mid-December. Profit gained 44 percent from a year earlier to $113.9 million.