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Jeffrey Chiu ● Daniel Druger ● Sarvesh Gupta. Executive Summary Large drop in video subscribers Root cause: Competition Need to build stronger customer.

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Presentation on theme: "Jeffrey Chiu ● Daniel Druger ● Sarvesh Gupta. Executive Summary Large drop in video subscribers Root cause: Competition Need to build stronger customer."— Presentation transcript:

1 Jeffrey Chiu ● Daniel Druger ● Sarvesh Gupta

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3 Executive Summary Large drop in video subscribers Root cause: Competition Need to build stronger customer connection

4 Executive Summary Create Customized Retention Program Rollout in the Greater Los Angeles Area Customize Content for Providers and Customers Increased Retention

5 Economic trends are systematic Recent drop in per capita disposable income Corresponding drop in coaxial cable subscriptions Similar drop in satellite TV revenues Situation Analysis

6 59%+ in each demo cite “home TV system” as the viewing choice for their favorite TV shows Small percentage of total market is cord cutting, only about 1% (1.7M) Source: Deloitte, “The State of the Media Democracy: Game Changing”, Feb 1, 2011 Experain Simmons “New Media Study”, June 1, 2011 Nielsen, “Nielsen Estimates Number of US Television Homes to be Million Nielsen data demonstrates internet used by consumers to supplement cable content, not replace it Situation Analysis

7 DirecTV and Dish Network have captured 25% of the cable market Situation Analysis

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9 38% market share (746K HH) 41,800 subscribers lost Market Analysis

10 87K (11.7%) 176K (23.6%) 483K (64.7%) Family Households HH Income $150K+ $160/Video Subscriber Family Households HH Income $150K+ $160/Video Subscriber 4,885 Customers Lost = $781,600 Revenue Market Analysis

11 87K (11.7%) 176K (23.6%) 483K (64.7%) Young Professionals HH Income $75K-$150K $129/Video Subscriber Young Professionals HH Income $75K-$150K $129/Video Subscriber 9,854 Customers Lost = $1,271,166 Revenue Market Analysis

12 87K (11.7%) 176K (23.6%) 483K (64.7%) Non Family Professionals HH Income below $75K $99/Video Subscriber Non Family Professionals HH Income below $75K $99/Video Subscriber 27,015 Customers Lost = $2,674,485 Revenue $4,744,890 TOTAL REVENUE LOST Market Analysis

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14 Free Membership Three Level Membership Points on Dollar Amount Redemption Options: Gifts, Discount Outlet & Auction Limited Membership One Level Membership Points on Dollar Amount Redemption Options: Online Store Purchase Discounts

15 Rewards Program Launched in % Drop - Disconnect Rate (Annual) 10% Reduction - Service Downgrade (Annual) 20% Increase – Revenue per Household (Annual) Rewards Program Launched in % Drop - Disconnect Rate (Annual) 10% Reduction - Service Downgrade (Annual) 20% Increase – Revenue per Household (Annual) Source: Market Analysis

16 CONNECT! “A program designed to engage the customer with unique rewards through active involvement” Proposed Program

17 SILVER $129 or less Monthly Spending on TWC Services 1 point on every dollar GOLD $130-$159 Monthly Spending on TWC Services 2 points on every dollar PLATINUM $160+ Monthly Spending on TWC Services 3 points on every dollar Proposed Program

18 Provide Promotions on Content Promote New products and Assess Potential Bonus Points on Enrollment Points on Monthly Expenditure Points on Other Services (VOD) Points on Selective Promotions Initial Enrollment Monthly Bill Orders VOD Seeks Other ways to Earn Points Retain Customer through engagement Realize Value in Product Targeted Marketing Initiatives Develop Strategic Partnerships Proposed Program

19 Home Earn Points For Premium Support Call CONNECT! 3000 Redeem Reach Out Today’s Trivia! What is the price of the latest Carl’s Jr. Burger? (200 points) Today’s Trivia! What is the price of the latest Carl’s Jr. Burger? (200 points) Welcome Mr. Tim Warner! Sign Out Submit Current Points Balance Redeem for Merchandise! (350 points) Proposed Program

20 Time Warner Cable Connect! Enrollment Two (2) Movies On Demand Correct Trivia Answer $133 Monthly Spend Tim Warner Proposed Program

21 Assumptions: 10% Annual retention increasing at 1% y/y Revenue/Customer=$ growing at 3% y/y Program cost =1% of Revenue =$847K No gains accounted for from service upgrades 5-Year Revenue Increase: $6.5 million Payback Period: 17 Months Benefit & Vision

22 Months Website Development Bill Redesign to Include Rewards Points Train Call Center Agents Market to Existing Customer (Direct mail, , bill inserts) Plan On-Screen Homepage Plan On-Screen Homepage Contact Partners for Branded Rewards/Sponsorship Opportunities Plan Additional Rollouts in SC Plan Additional Rollouts in SC Benefit & Vision

23 Slower than expected adoption of the program Low initial investment Los Angeles test market Competition adopts similar practices Leverage existing relationships with content providers and current customers Perceived narrow focus of program Increased service upgrades and decreased service downgrades Improved customer satisfaction Benefit & Vision

24 Tailor Rewards and Content to Individual Customer Preferences Continue to Develop New Partnership Opportunities Benefit & Vision

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26 DVR Household Trend Cord-Cutting TV Still Preferred Method General TWC Market Profile Family Household Segment Young Professional Segment Aging Population Segment Customer Pyramid Viewing Habits by Demo TV Consumption for Internet Users Live and Playback by Demo TWC Sub Gains/Losses LA Coverage Statistics – 1 LA Coverage Statistics – 2 TWC Revenue Breakdown HH Cable Connection by Income Sub Losses by Segment Gains from Retention Program Sample On-Screen Display Competitor Comparison – 1 Competitor Comparison - 2

27 TV sets per household has increased: Opportunity to take advantage of potential service-adds leading to revenue gains.

28 Small percentage of total market that is cord cutting, only about 1% (1.7M)

29 Television still preferred method of watching favorite TV shows across all demos

30  Male: 50% / Female: 50%  Mean Age:  Average HH Income: $86,056  Average HH Size: 2.91  Key Consumers: A25-64 (55%)  P2-19 make up 33% of consumers

31 Family Households  P25-49 (37% of market)  High income HH  HH has multiple cable set- top-boxes  Majority of P2-19 universe within HH (33% of market)  Heavy DVR and on-demand usage  TV viewing is a shared experience

32 Young Professionals  P20-34 (21% of market)  College graduates  No children  Income growth potential  Future family household  Heavy DVR and on-demand usage  High price sensitivity  Most likely to switch/cancel video subscriptions

33 Aging Population  P50+ (29% of market)  Stable customers, low churn  Heavy users of traditional services: 40+ hours/week spent watching traditional TV  TV watching is done live  TV viewing is a personal experience

34 I RON G OLD P LATINUM Family Households: Multiple set-top-boxes, high usage of services, low price sensitivity, access to future consumers, bundle services (3) Young Professionals: Use full-range of services, high earning potential, bundle services (2) Aging Population: Low usage of broad services, low earning potential, below average revenue per subscriber Non-family Professional: Use full- range of services, less price sensitive, bundle services (2), low growth potential

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36  Most consumers, in all age groups, watch TV shows on a TV set to some degree.  Most at risk are P18-34 & P35-44

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38 Video 2Q10 Subscribers2Q11 SubscribersGain/Loss 12,056, %= 11,417,604(639,000) 2Q10 rev/cust2Q11 rev/cust $ %= $ Q10 Sub Revenue2Q11 Sub Revenue% Rev Loss$ Rev Loss $ 1,307,418,113 $ 1,297,496, %(9,921,620) Internet 2Q10 Subscribers2Q11 SubscribersGain/Loss 9,291, %= 9,700,000408,812 Phone 2Q10 Subscribers2Q11 SubscribersGain/Loss 4,314, %= 4,500,000185,523

39 Coverage AreaHH UEMaleFemaleMedian AgeHH Income Alhambra 31,91048%52% $ 73,503 Burbank 28,15649%51% $ 70,272 East San Fernando Valley 134,81050% $ 66,779 Glendale 54,85948%52% $ 88,552 Hollywood 99,36751%49% $ 53,479 Los Feliz 63,65551%49% $ 61,361 Pasadena 36,16648%52% $ 104,005 South Pasadena 8,80447%53% $ 146,276 South San Fernando Valley 40,26348%52% $ 133,279 West San Fernando Valley 141,97250% $ 84,590 Westside/Beverly Hills 106,09049%51% $ 135,477 TOTAL 746, , , $ 86, % of HH w/ children 480, %50.4% Average HH size $75,363 Market Weekly time spent watching traditional TV 2010 Total HH in LA footprint1,957,778 Current Market Share38% Total Subscribers 2Q11 12,056,604 LA Subscribers as % of Total6% Total 2Q11 y/y loss 639,000 Total 2Q11 y/y loss (%)-5.3% Estimated LA 2Q11 y/y loss 41,754 2Q10 HH UE 787,806 Avg 2Q11 rev per sub $ LA revenue lost $ 4,744, LA Coverage Statistics

40 Coverage AreaHH UEA2-19A20-24A25-34A35-49A50-64A20-64A65+ Alhambra 31,91026%6%13%23%18%54%14% Burbank 28,15631%6%14%24%18%56%13% East San Fernando Valley 134,81037%8%15%23%15%53%10% Glendale 54,85931%6%12%24%19%55%14% Hollywood 99,36735%8%17%23%15%55%10% Los Feliz 63,65538%8%15%22%15%52%10% Pasadena 36,16627%6%13%23%24%60%13% South Pasadena 8,80430%5%12%25%20%57%13% South San Fernando Valley 40,26328%5%13%25%20%58%14% West San Fernando Valley 141,97236%7%13%23%17%53%11% Westside/Beverly Hills 106,09027%8%16%23%19%58%15% TOTAL 746, ,312 53, , , , ,221 88, % of HH w/ children 480,45733%7%14%23%17%55%12% Average HH size 2.937%8%16%38%53%10% Weekly time spent watching traditional TV23:0024:1728:0832:5841:04 46:16

41 Time Warner Cable % Change % Change Subscription: Programming tiers $ 7,227 $ 7,1880.5% Video $ 10,995 $ 10,7602.2%Premium channels $ 865 $ % High Speed Data $ 4,960 $ 4,5209.7% Transactional video- on-demand $ 366 $ % Voice $ 2,032 $ 1,8867.7% Video equipment rental and installation charges $ 1,308 $ 1,1959.5% Total Subscription $ 17,987 $ 17,1664.8%DVR service $ 582 $ % Advertising $ 881 $ % Franchise and other fees $ 493 $ % Total $ 18,868 $ 17,8685.6%Other $ 154 $ % Total $ 10,995 $ 10,7602.2% % Change Residential video12, % Commercial video % Residential high-speed data % Commercial high-speed data % Residential Digital Phone % Commercial Digital Phone % Primary service units %

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43 Income% of Pop.Subs lost y/y <$75K64.7% 27,015 $ $75K-$150K23.6% 9,854 $ $150K+11.7% 4,885 $ Total100.0%41,754 Avg Rev/Cust $

44 Total Video Subscriber Loss Target Retention Rate10%11.00%12%13%14% Total customers retained Revenue per Customer$113.64$117.05$120.56$124.18$ Target Revenue Return$475,015$973,639$1,426,765$1,751,545$1,864,297 SG&A Costs EBIT (in billions)$475,015$973,639$1,426,765$1,751,545$1,864,297 Cumulative Revenue$475,015 $1,448,654$2,875,419$4,626,964$6,491,261 Total Revenue $84,781, Total Cost of Program $847,813.49

45 (500 points) (750 points) (1000 points) (500 points)(1200 points) Points Balance 3000 Redeem Now! Today’s Trivia! What is the price of the latest Carl’s Jr. Burger? (200 points) Today’s Trivia! What is the price of the latest Carl’s Jr. Burger? (200 points) Submit In a universe as vast as it is mysterious, a small but powerful force has existed for centuries. Protectors of peace and justice, they are called the Green Lantern Corps. A brotherhood of warriors sworn to keep intergalactic order, each Green Lantern wears a ring that grants him superpowers. Watch Today! (1200 points or $14.95) Select Merchandise (350 points each) CONNECT! Benefit & Vision

46 DirecTV ChoiceChoice XtraUltimatePremiere Channels Price $29.99 ($60.99)$34.99 (65.99)$39.99 ($70.99) $83.99 ($114.99) Free HD ServiceNoYes Free HD DVRYes Free NFL Sunday TicketNoYes DirecTV CinemaNoYes Free HBO/Showtime/Starz (3 months) No (Showtime)Yes HBO Go/Cinemax GoNoYes Dish Network DishFAMILY America's Top 100 America's top 200 America's top 250 Channels Price $19.99 ($24.99)$29.99 ($44.99)$39.99 ($59.99)$44.99 ($69.99)

47 AT&T Uverse BasicPremium Channels Price$89.00$ Starz/Encore/ShowtimeNoYes Verizon FIOS Prime HDExtreme HDUltimate HD Channels Price$64.99$74.99$89.99 HBO/Cinemax (50% off)Yes Time Warner Cable (TV and Internet) BasicMidtierPremium Channels200 Price$79.99$99.99$ Free local HDYes HD DVRNoYes Movies/Free on DemandYes HBO/CinemaxNo Yes


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