feCablevision CEO: Pay-TV Is The “Milk & Eggs” Of His Business; Internet Is The “Soda & Chips”

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(Ben Schumin)

As we noted earlier today, Comcast now effectively has exactly the same number of Internet customers as it does cable subscribers, and the Internet users will soon outnumber those who get their TV from Comcast. And while a pay-TV customer brings in significantly more gross revenue for a cable company than someone who is broadband-only, these companies are likely making more profit off their Internet users.

This is according to Cablevision CEO James Dolan, whose New York-based company also announced its quarterly earnings this morning. And like Comcast, it is seeing its cable subscriber numbers drop amid increased prices and competition from streaming products.

Speaking about the earnings this morning, Dolan likened the cable/ISP business to running a convenience store, where you’ve got certain items that customers rely on you to carry and those other items that you rely on customers to buy so that you make a profit.

“Our philosophy is that video is akin to the eggs and milk in a convenience store. You have to have it, but you don’t make money on it,” Dolan explained, according to FierceCable.com.

That’s where the “soda and chips” of selling broadband comes in.

“You can charge more, you can differentiate and the margins are good,” said Dolan.

And so it appears that the company’s new goal is to make sure as many people buy their soda and chips from Cablevision.

That’s why the company is currently the only pay-TV provider making the standalone HBO Now streaming service available to its customers. That not only gives some consumers with DSL (or without any Internet access) to get faster service, it also allows Cablevision to share in some of that $15/month charge for the service. The company’s quarterly earnings don’t include any information about this deal as the quarter ended March 31, shortly before the launch of HBO Now.

Cablevision also recently announced that its customers will be able to order Hulu Plus with their online service. That’s another way for a pay-TV company to make even more revenue from an existing customer base.

It’s really no different than the existing pay-TV model where the customer pays for a base level of service and then buys premium services from the cable company, who then takes a piece of the cost.

However, there has been a lot of handwringing from some in the pay-TV industry that making these online entertainment options readily available through the cable company would lead to further cord-cutting.

FierceCable reports that Cablevision COO Kristin Dolan is not seeing cannibalization, but is seeing more people sign up for broadband.

We’ve spoken to other analysts who support this “if you can’t beat ’em, make some money from ’em” approach. They say any cable companies that don’t make deals to sell HBO Now, Netflix, Hulu, or other subscriptions directly to customers are setting themselves up for disaster.

“Consumers are going to buy these things anyway,” one analyst told Consumerist. “It’s not like people aren’t aware of Hulu or HBO Now. These aren’t secrets. By not getting into revenue-sharing with these services, pay-TV operators are just watching their money go to someone else.”

by Chris Morran via Consumerist