March 18, 2009 / 6:14 PM / 10 years ago

Cable industry hopes downturn keeps people at home

BERLIN (Reuters) - Cable and online TV companies are betting they can defy the global economic crisis and grow despite tough times, arguing consumers are choosing to sit out the downturn and spend on home entertainment.

A visitor looks at television programs in Cannes, southeastern France, October 13, 2008. REUTERS/Eric Gaillard

“My personal view is that the economic situation will continue to deteriorate for a while,” said Tom Rogers, chief executive of digital video recorder maker TiVo, at an industry event in Berlin on Wednesday.

“People are clearly looking for cheaper entertainment,” he said, adding while consumers may be reluctant to make large purchases they seem to be prepared to pay for a high definition TV.

TiVo, which posted slower subscriber growth last year than in 2007, hopes to be the company chosen by viewers overwhelmed by a plethora of channels and content.

“We call it the easy couch potato approach,” Rogers said.

TiVo was a pioneer in digital video recorders (DVRs) but suffered as cable and satellite operators began offering generic DVRs to their customers for far less than a TiVo box.

TiVo has tried to reposition itself to appeal to cost-conscious consumers. Its software is also used in DVRs offered by television service providers such as Comcast and DirectTV Group Inc, which Rogers hopes will boost subscriber growth by next year.

Smaller, unlisted online TV company Joost hopes to attract customers, in particular young audiences in their twenties, with a free service.

“In recessionary times we are an attractive value offer,” Joost Chief Executive Mike Volpi said, adding the company does not see itself as a substitute for TV but as a free alternative in consuming some programs.

Joost, founded by Niklas Zennstroem and Janus Friis — the brains behind Internet telephony service Skype — provides streams of broadcast quality and relies on ad revenue.

“We see plenty of growth,” Volpi said, adding Joost aimed to increase unique visitor figures to 10 million a month by the end of the year from around 3.5 million.

Joost’s programmes are interrupted by 30 second commercial breaks and Volpi said this appealed to advertisers looking for new ways to place brands.

“In the U.S. we are pretty much sold out, we have more advertisers interested than we can accommodate on the platform right now,” Volpi said.

The company regularly tests how much advertising its customers will tolerate and Volpi admitted there was little tolerance for ad breaks in music videos.

Volpi said at a panel discussion on Wednesday eventually the company would move toward a subscriber-based model because customers pay for premium content.

Germany-based cable operator UnityMedia echoed that view.

“Good quality content is not for free,” said UnityMedia Chief Executive Parm Sandhu, who said the operator had seen strong growth in the fourth quarter of 2008 and expects that trend to continue.

Sandhu said UnityMedia, which plans to increase head count this year, was keen to grow but complained cable companies in Germany were often overlooked as a means to expand Internet access.

“On a state level we do get recognition but on a federal level it gets quite lost,” Sandhu said in light of government plans to extend broadband technology.

Editing by David Holmes

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