Charter Makes Triple-Play During 1Q

While some on Wall Street believe cable operators will one day reap the benefits of interactive advertising, so far, MSOs are moving at a glacial pace. Charter Communications, the third-largest cable operator, said Thursday it hasn't moved beyond the test phase, despite successful trials in two of its largest markets.

President-CEO Neil Smit said the company is heartened by results of trials in its California and St. Louis areas. Although advertisers and consumers appear pleased, a large-scale rollout is a ways off. Interactive ads remain a small portion of Charter's revenues, he added.

Still, Smit was bullish on the potential down the road. "It's a good opportunity for our business and the industry going forward, and we'll continue to monitor the results and invest appropriately," he said on a conference call to announce Charter's first-quarter results.

Perhaps one holdup could be an overall slowdown in Charter's ad sales operations, where it sells local avails. Revenues dropped by 6% ($4 million) to $63 million for the quarter, due to slow demand from national advertisers. (Overall, the company reported a 10.7% revenue gain to $1.4 billion.)

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Charter, which is in 5.4 million homes, isn't the first MSO to express long-term interest--although short-term reticence--about interactive ads. In February, Cablevision said revenues would not be significant this year, but it sees an upside in the future. Cablevision has had discussions with Comcast, Time Warner and others about creating a national network for interactive ad buys, but said a launch isn't imminent. It isn't clear whether Charter would be involved.

Satellite operator Dish Network, a competitor to cable operators, has dipped its toe in the water, experimenting with an interactive effort for Chase. Avails the DBS operator owns include "triggers," in which a viewer can click through to get more information.

Interactive ads are attractive to advertisers, since they offer the viewer the opportunity to obtain more product details, access to special offers, and perhaps most importantly, some data on viewership and engagement. While interactive ads may be on Charter's back burner, sales of cable's triple-play bundle--TV, Internet and phone in one package--remain a top priority. That holds for MSOs across the board. "Bundling is the key to our continued growth," Smit said.

In the first quarter, Charter boosted its marketing spending, focusing on attracting more customers to upgrade to the bundle. A secondary focus is persuading customers to add HD, VOD and DVR services. In a sign of how much the triple-play is contributing to revenue increases with upgraded TV users, Charter said telephone customers increased by some 126,800 in the first quarter (more than double the performance in the same period a year ago)--while it added about the same number of Internet customers: 123,900.

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