The Daily Interview: Taking Cable to the Next Level

Joe Collins is on the job.

Joseph Collins Chairman Interactive Video division, AOL Time Warner

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On Thursday morning, AOL Time Warner (AOL) named Collins, chairman and CEO of Time Warner Cable, as chairman of the company's new interactive video division.

Reporting directly to AOL Time Warner CEO Jerry Levin, Collins will focus on the growth of interactive television and advanced cable services for the mass market, including video on demand (VOD) and telephone service over cable. The new division will coordinate companywide interactive video initiatives with America Online and Time Warner Cable; the cable division will now be headed by chairman Glenn Britt and president Thomas Rutledge.

Though Collins says staffing for the new division hasn't yet been set -- other than Time Warner Cable veteran James Chiddix becoming president of its Interactive Personal Video Group -- the mission is of crucial importance to AOL Time Warner. In the second quarter ended June 30, the company's cable division reported earnings before interest, taxes, depreciation and amortization of $777 million, 31% of AOL Time Warner's total EBITDA and just below the AOL online service's contribution. Because the growth of plain-vanilla cable service has been slowing industrywide, new services like VOD and high-speed data are essential for maintaining high growth.

Collins, who has nearly three decades of experience at Time Warner Cable and its predecessor companies, talked with TheStreet.com Thursday about what's on his plate.

TSC: The cutting edge hasn't always worked out for the cable TV industry -- I'm thinking of shuttered ventures such as the QUBE interactive cable TV system in Columbus, Ohio, and Time Warner's Full Service Network venture in Orlando. What's different this time around as you take this job?

Collins: I think there are really two big considerations. The first one is that the cable industry has been investing billions of dollars over the last five or six years to really transform their architecture. You take a look at what's available out there now. ... I bet you that 100%, or very close to that, of Time Warner Cable's capacity (and a clear majority of the rest of the cable industry), have now rebuilt their systems, so they have this incredible capability to deliver a broadband product to the consumer. That plus the fact that virtually the whole industry now has up and running a very robust IP [Internet protocol] platform into the home and are offering broadband IP service. So that track already exists out there.

The other consideration that I think is very different is that AOL Time Warner really now has all the pieces that it needs to be able to do this. If you go back and look at Orlando, the really difficult thing for the cable company was the body of computer code that it took ... just to provide the level of services that we did there. In AOL we now have a resource whose business it is to operate a nationwide, digital platform, which they do better than anybody in the world.

TSC: That's the supply side. How's the demand side different -- the consumer interest in what you're offering?

Collins: Well, we think a lot of the guts of this opportunity is really the ability for the consumer to get a unique video stream just to themselves. That concept is embodied in things like video on demand and subscription video on demand.

But more importantly, there's been in the last seven or eight years a real change in how the consumer has watched television, just because of home video and the DVD player. The idea of having a body of video products that you can stop and start and fast forward and so on is really now totally accepted in almost all American households. ... We think the consumer is ready for this to go.

TSC: What are the early returns for the subscription video-on-demand experiments going on at Time Warner and elsewhere this summer? [In a subscription VOD service, consumers pay a flat monthly fee for the opportunity to watch, any time and as often as they choose, movies or shows from a limited programming library. In straightforward VOD service, consumers pay for each individual program they watch.]

Collins: I think the early returns are gangbusters. Basically, the consumers really like this. They're willing to pay for it.

TSC: How much?

Collins: In the first test we're in the midst of in Columbia, S.C., if you're already an HBO subscriber, then for an additional $3.95 you get the capability to watch any of the HBO product in the servers whenever you want to. Now, as we roll this out, we're going to be testing other price points and so forth.

TSC: What's the acceptance rate at that price?

Collins: It's a little early to say exactly, but it's a multiple of what we would have expected.

TSC: How popular is SVOD compared to VOD?

Collins: We think they're both going to work. And really, we think that sometime in the next five years, most Americans will have the capability to really look at a much broader variety of programming available on that basis. Everything from news on demand to series on demand. Virtually everything that's on television today, we think in the future is going to be available on that basis.

TSC: What's the cable industry's best defense against the home satellite business?

Collins: Quite frankly, all of these things we're talking about here that this new division is going to deal with are all things that are very difficult to do with a satellite -- if not impossible, in some cases. So we think that this is a tremendous product, not just from Time Warner Cable's standpoint, but from the whole cable industry's standpoint, because it really is taking advantage of the broadband, two-way cable platform that's out there that is really hard to duplicate on a satellite basis.

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