Time Warner Cable’s Porn Problem: It Isn’t Selling Enough Porn

Published on July 29, 2011
by Peter Kafka

Big cable companies like Comcast and Time Warner Cable keep saying they don’t see Web video cutting into their business: Even if people are watching more Hulu, Netflix, Apple TV, etc., it’s not hurting cable, say the cable guys.

But there’s at least one big, dirty exception.

Time Warner Cable said yesterday that its video-on-demand business dropped significantly in the last quarter. Asked to explain where the drop came from, CEO Glenn Britt came clean, more or less — much of it is because, instead of renting “3 Way Cheating Wives” in HD for $9.98, his customers are getting their fix on the Web for free.

There’s something quite special about listening to buttoned-down corporate chieftains talk about their porn-profit margins. If you ever get the chance, you really should hear for yourself. But this excerpted transcript will have to do for now:

One of the things going on with VOD is that there’s been fairly steady trends over some time period now for adult to go down, largely because there’s that kind of material available on the Internet for free. And that’s pretty high margin. That’s been not just this quarter, but going on for some time period.

To be fair, drooping porn rentals don’t account for all of Time Warner Cable’s VOD decline. CFO Rob Marcus said the porn gap is responsible for about a third of the drop, and that the rest is because there weren’t many big pay-per-view events like boxing matches last quarter, and because regular movie rentals are down, too.

Ah. So maybe iTunes and Netflix, et al, are taking dollars away from cable, right? After all, Time Warner Cable video subscriber totals dropped last quarter, again. “I wouldn’t draw any conclusions quite yet,” Marcus says.

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