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Time Warner Cable CEO Warns: We'll Cut Expensive Channels With Low Ratings

Sterling Wong

In the cable world, there's a constant price war between pay TV operators and content providers. This year, we've seen a number of high-profile carriage disputes between the two sides.

AMC (AMCX), for example, is now engaged in fierce contract negotiations with Verizon (VZ), and has warned that Verizon customers might soon lose its channels. Over the summer, DirecTV (DTV) and Viacom (VIAB) also had a contractual skirmish in the summer that resulted in a 10-day blackout of Viacom channels for DirecTV customers before a carriage deal was reached.

Indeed, pay TV operators have become more and more vocal with their complaints about how programming costs have become increasingly expensive.

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Last month, DirecTV CEO Mike White said in an earnings call, "I think we're going to continue to see very, very tough discussions by all distributors with content providers, to try and mitigate these outrageous cost increases that are unaffordable to the average customer."

The latest to fire a salvo is Time Warner Cable (TWC) CEO Glenn Britt. Speaking at the UBS 40th Annual Global Media and Communications Conference, Britt said, "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."

Britt noted that since 2008, Time Warner's programming cost per customer has increased by more than 30%, while the prices it charges video customers have only gone up 15%. The amount of money his company paid to Hollywood giants was "out of whack," he said.

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"If you have a network that has hashmark ratings [low audiences] and isn't going anywhere, we're going to have a different conversation" when Time Warner renegotiates contracts when the current ones expire, compared to those "we had with them five, six, or 10 years ago," add Britt.

Cable TV operators have struggled with cord-cutting in recent years, with anemic growth in the market as customers turn to the likes of Netflix (NFLX) and YouTube (GOOG). In the third quarter of 2012, the cable TV industry as a whole lost 127,000 subscribers.

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Britt said that cord-cutting "appears to be fairly minor at the moment," but nonetheless said that to the extent that it is happening, some of the blame has to go to content providers. "Programming and packages keep getting more and more expensive. This stuff is just starting to cost too much," he said. "It's out of touch with consumers. It can't continue that way for another 10 or 20 years."

"I don't have any magic bullet about this," Britt warned, "We are going to take a hard look at each service. Services that cost too much... we're going to drop them. Or we are going to put them on a different tier."

At the start of the year, Time Warner engaged in its own fierce dispute with the MSG Network (MSG) over high costs, but the cable giant eventually relented after Jeremy Lin reignited fan fervor over the New York Knicks.