Time Warner Cable‘s Glenn Britt took a tougher stance on this subject than I’ve heard in a while in his presentation this morning at the UBS Global Media and Communications Conference in New York. “We’re going to take a hard look at each service and those services that cost too much relative to the viewership, we’re going to drop them,” he says. He adds that “if you have a network that has hashmark ratings and isn’t going anywhere, we’re going to have a different conversation” in 2013 than before. The problem, he says, is that many cable network owners “almost feel like it’s a birthright” for their channels to be included in the basic pay TV bundle. When the channels don’t perform, owners say “next year I’ll work harder and spend more money on programming and it’ll be good.” But Time Warner Cable, along with other pay TV distributors, can no longer pass those costs along to subscribers. With the economy “bouncing along the bottom,” Britt says, “the consumer is telling us that we can’t afford these prices anymore.” His company has been squeezed: Since 2008 his programming costs have risen 30% while his video prices have gone up 15%, exceeding the 10% rise in the Consumer Price Index. Network owners have an interest in maintaining the current system of bundling channels because “the entertainment business is one of the riskiest businesses on the planet.” If consumers were allowed to just pay for the channels they want, television’s business model would look “a lot more like Broadway theaters.”
In response to a question, Britt denied that his company more than makes up for the programming costs with the huge profits it collects from its broadband service. “It is a wrong impression to say that broadband is obscenely profitable and video isn’t….A pretty high percentage of our capital spending goes to broadband.” Early this year Time Warner Cable battled the MSG Network regional sports channel over high costs, but had to back down when Jeremy Lin — then of the New York Knicks — began a sensational scoring run.