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Cable Operators

Expanding the Brand

9/23/2005 8:00 PM Eastern

Despite the naysayers, Cablevision Systems Corp. hit a home run with its Optimum triple-play strategy, when it began offering video, voice and high-speed data for a tidy $29.95 each. The MSO this year is not only continuing to make that discounted bundled offer available to new subscribers, but is pursuing other opportunities. That includes creating various brand extensions, possibly making wireless services part of the mix, and hawking a multi-line phone product for the business market.

“We are looking at many new product additions that we could put into the marketplace in the next year that would greatly enhance the performance, the value and the retention of all three products,” says Patricia Gottesman, Cablevision executive vice president of product management and marketing.

That includes considering “a suite of new features and functionality that will be added to our existing product lineup for free,” Gottesman says, as well as “suites of product extensions that will be available for a la carte charges over and above the cost of the services themselves.”

The base for Cablevision’s triple play is its iO: Interactive Optimum digital service, which recently won its fourth Emmy Award. The video service has 58% penetration, the highest in the industry, says Cablevision senior vice president of product management Kristin Dolan.

“From day one, every digital customer has had video on demand, they’ve had interactive television,” Dolan says. “And we’ve kept building on those platforms to create different packages.”

Add that to a $90-a-month bundle, which prices phone service at $29.95 in a market where the average phone bill is $65, and its no surprise that the triple play has become Cablevision’s sales cornerstone following its debut in June 2004.

“The triple play continues to be a staple of our acquisition marketing,” Gottesman says.

As of June 30, the MSO had 175,000 subscribers taking the special triple-play offer, $29.95 each for a year, according to Gottesman.

“Close to one in three customers who were approaching us to buy video products were also buying Optimum Online and Optimum Voice through this offer, contributing an even greater efficiency and retention benefit to our business than we have been able to experience at any other prior time,” Gottesman says.

Critics of Cablevision’s $90 package thought it would fail for a variety of reasons, perhaps by sparking a market-wide price war. It never happened, and the MSO has several explanations for the offer’s success in the New York DMA.

“Usually with a bundle people will say, 'For less than $100, or for $99,’ where we message it as '$29, $29, $29,’ because we really want to drive the value of each product,” says Cablevision senior vice president of marketing Jonathan Hargis. “We feel that even at $89 or $99, people that aren’t buying anything from us might perceive it as that’s a lot of money to be giving one company.”

Another ingredient in Cablevision’s success has been its ongoing mass marketing of the triple play, under the Optimum brand, in media such as broadcast TV, Hargis says.

“It has been a constant drum beat for the 16 months that the offer’s been in the marketplace,” he says, with broadcast direct-response ads airing three weeks a month.

One of Cablevision’s marketing advantages is that it is has a single cluster in one DMA.

“We can use DRTV [direct-response TV] and broadcast TV, which is more of a challenge for some other cable companies,” says Hargis, who pointed out that New York is a very competitive market and therefore it’s not “a slam-dunk by just our geography.”

Cablevision’s latest triple-play marketing tactic has been to run freestanding inserts, 12 to 14 pages, in major newspapers each month.

The Optimum bundle has helped on the retention front. “The churn on the triple play is close to 20% less than the churn that we experience on the rest of our customer base,” Gottesman says. “And as we look at the churn for subs coming out of the offer, it is also significantly less than the churn we experience on all other offers.”

In February, Cablevision started phasing in Optimum Rewards, which extends discounts of up to $25 a month to any customer who either has all three of digital services, or upgrades to all three, and is not under any other promotional offer.

Cablevision not only wants to keep its subscribers, it wants them to buy more services. The MSO has been talking to wireless hot-spot vendors to make Optimum Online serve as “the support network behind a version of the service that is portable, mobile and wireless” or to “complement our existing network with hot-spots that are part of the Cablevision network,” Gottesman says.

“We’re looking at wireless in a number of different executions, while waiting for a complete view that would enable us to have a very cost-efficient platform for wireless across our footprint,” she says.

There are additional opportunities for high-speed data, like enhancing video streaming and downloading with specialized content.

“We’re looking at the addition of television product, both in the form of video downloads and also unicast and multicast [architectures],” Gottesman says. “On digital cable, we’re looking at switched-video services that would bring us to a place where channel capacity is virtually limitless, and we’re able to introduce new tiers of services that customers can buy a la carte, depending on their interests.”

Optimum Voice is beginning to market and sell a multiline product, at a “great value proposition” for its business customers, according to Gottesman.

“Right now, we’re offering one to four lines; we’ll look to expand that next year, and our early sales success on multi-line OV is significant,” she says.

The MSO has tried to keep the triple-play package “sticky” by linking all three products. For example, Cablevision subscribers can get caller ID and voicemail via their TV sets, according to Dolan.

“Anything that we’re working on that can tie the three together we think will not only reinforce the triple-play sales message, but will also help on retention on the back end,” she says.

September