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Cable Operators

The Invention Engine

8/26/2005 8:00 PM Eastern

Time Warner Cable has long held the belief that being the first out of the gate with a new product or service will ensure its place as a leader in the increasingly competitive cable landscape. The company has invested million of dollars and hundreds of man hours to satisfy that drive. And while the MSO has hit some home runs, other seemingly bright prospects have been scuttled for reasons that include cost, technological availability and consumer desire.

But experiments that have fallen flat for one reason or another have, in some cases, risen from the ashes like a phoenix. Take Mystro TV, for example. Time Warner executives worked secretly for years on the interactive TV project only to shelve it after it became too cumbersome and costly to manage.

'STARTOVER’ IS COMING

Much of the technology developed for that project is being used in another venture, dubbed Startover, which has executives chomping at the bit. Startover is an extension of Time Warner’s video-on-demand platform that allows the MSO to encode shows in real time. As a result, digital customers can start, stop, rewind and pause shows without having to use a digital video recorder. The product will be rolled out in Columbia, S.C., later this year.

“People love DVRs,” says Mike LaJoie, Time Warner chief technology officer. “But it has only has two tuners. Startover has the ability to do this with as many channels and programs we can cut deals with. It could be one of the most exciting products we offer this year.”

Time Warner Cable “has long been known for its product leadership,” says CEO Glenn Britt. “We want to continue that legacy. It’s how you compete in the world. It’s a much better way to compete than the alternative, that is, on price.”

In any given year, Time Warner launches at least two new products, but the company did launch digital video, high-speed data and VOD at almost the same time a few years back. Chief operating officer Landel Hobbs says the life cycle of new products is growing shorter.

“Look at how long it took for video to take shape,” Hobbs says. “Then look at the life cycle of high-speed data and video on demand. The penetration rates for those products are light years ahead of video.” According to Hobbs, that’s what keeps the MSO striving to be on the leading edge of innovation.

“We have so many ideas right now — over 100. The product-management group is poised to prioritize them,” he adds, noting that it’s not just the competitive landscape that’s driving the research in development. “We also understand that many of the new products we’re introducing have much better margins than some established products, and that’s important long term. We’d rather be an innovator and have things people want to copy, and Wall Street understands that as well.”

Among the new products Time Warner is hoping roll out this year: Internet protocol TV, which delivers the linear feed of 75 channels to Road Runner customers in San Diego.

“This isn’t an offensive move against what the telcos are doing as much as it is a response to what we see as tectonic movements in video content and where it comes from,” LaJoie says. “The day is quickly coming where video will come from a variety of devices.”

But innovation doesn’t necessarily mean product development. Time Warner chief marketing officer Sam Howe believes innovation in his department is essential to the company’s overall success. Sure, he needs products he can sell, but how those products and services are sold must be cutting edge and innovative.

For instance, it has been a widely held belief that digital phone service should be sold in a bundle with other services. But Howe, who was vice president of marketing for voice services before being elevated to CMO in June, embarked on a campaign earlier this year that had Time Warner’s divisions selling phone service as a standalone product first and then having customer service reps pile on other products after the digital sale had been made.

“We layered in new things to offer after the sale, not before,” Howe says. “Some 75% of our phone customers are triple-play customers. But bundling is a transactional strategy. Phone was new story for us and a way to get people to call us. We then were able to create savings they could have by adding other products to their service bundles. So we did a lot of upselling.”

The strategy worked. Time Warner added a whopping 242,000 new phone customers during the second quarter.

TALKING UP 'EXPERIENCES’

The MSO is also changing the way it looks at marketing, Howe says. “We want to move away from talking about the products and move toward talking about experiences consumers have with those products.”

And to do that requires some innovation in terms of back-office functions, customer-service prompts and mining the company’s database more thoroughly, Howe says. In the 10 divisions where a new interactive customer-management program is in place, upsell rates are skyrocketing: 30% of billing calls are resulting in a sale of some sort, compared to the average 5% upsell rates in divisions without the program.

September