The cable company that sends Teslas and Beamers to your door
WASHINGTON: If you’ve ever signed up for cable, you’re probably familiar with those big, white vans your company usually sends with someone to help install your service. But a new cable company in town is teasing a very different experience. Instead of a corporate truck, what you might see at the curb is a BMW, or perhaps a Tesla.
Running on futuristic electric batteries rather than petrol, the luxury vehicles reflect the kind of business Layer3 wants to be: An upscale, next- gen TV provider. But the way the company is going about it may not be what you expect. It is betting big on an old- school approach, one where the traditional, fat cable bundle is king and the customers are TV die-hards who don’t buy into the newfangled streaming services flooding the market.
At a time when Americans are increasingly abandoning their cable companies - flocking to alternatives such as Netflix and Hulu - Layer3’s premise is that the big bundle of basic and premium channels that has sustained the industry for decades is still a viable formula.
“We’re the first cable company in . . . 10 years to come that’s brand new,” said Jeff Binder, Layer3’s chief executive. “Consumers haven’t had a young innovative company to provide ( pay-TV) services to them since the mid-1990s, when Dish and DirectTV came on the scene.”
That notion flies in the face of moves by major players - AT& T, HBO, CBS - that believe major industry change is afoot. These companies have embraced online streaming in a big way, launching flashy stand- alone apps that deliver content over the Internet and to mobile devices in a bid to compete with Netflix. Some, such as AT& T, estimate there could be 20 million US households to win over that don’t currently subscribe to cable.
For mainstream TV firms, the right response to streaming is to start swimming with the tide. Layer3’s first instinct is to swim in the other direction.
After several pilot projects in Texas and Illinois, Layer3 launched last summer in the District of Columbia - its first official market - and it plans to expand into most major US cities over the next two years.
The company’s standard package costs US$ 79 ( RM356) a month and gives you about 150 channels as well as trial subscriptions to HBO and Epix; and optional add- ons include Showtime, Cinemax and Spanish-language content. The vast majority of Layer3’s 250channel lineup comes in high definition.
In interviews, executives declined to say how many customers have signed up. But they predict there may be as many as 35 million current cable subscribers who will not be lured away by online substitutes such as Dish’s SlingTV or DirecTV Now, the new streaming service from AT& amp;T.
But if the industry’s biggest players think streaming is the future, what makes Layer3 think it can survive for the long haul?
One way of answering this is by looking not at how many households are cutting the cord every year, but at how much they earn. It turns out that the most avid cord- cutters among us tend to be lower-income Americans. Does your household make US$ 75,000 a year or more? You’re more likely to have stuck with your cable company than if your annual income is below US$ 20,000.
Those findings from the Pew Research Center may sound familiar to those who’ve cancelled their subscriptions because of rising bills. For many Americans, cable is just too expensive. But Layer3 is more interested in the other folks - the more affluent households that absolutely need their pay-TV and are still willing to shell out for it. This market may shrink as cord- cutting grows. But it’s still enormous, and it’s where Layer3 hopes to find its niche.
“It is certainly a counterintuitive strategy,” said Craig Moffett, an industry analyst at MoffettNathanson. “Theirs will be a high cost, and therefore high priced, alternative to a service that many believe is already too expensive. There’s a premium segment in any market, but what remains to be seen is whether they can capture enough of that premium segment.”
To help court those high- end customers, Layer3 is trying to improve on the reputation many cable providers have gained as stodgy, hulking corporations trying to nickel- and- dime their customers.
It isn’t just rolling out redcarpet customer service in the form of fancy cars or a “whiteglove” customer experience, such as your ability to text the company whenever you have questions or concerns. It’s also trying to lure subscribers with the promise of next- gen technology embedded in its product. —WP-Bloomberg