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Sinking porn sales have left a gaping hole in Time Warner Cable's revenue.  (Source: AP Photo)

Cable companies like TWC typically rely on video on demand (VOD) content like porn or pay-per-view sporting events, a profitable backend to their general services. But customers would rather find porn online than pay expensive fees to their cable provider.  (Source: AP Photo)
It's getting harder and harder to get customers to submit to loads of porn purchases

When it comes to its video on demand (VOD) profit line, Time Warner Cable Inc. (TWC) can't seem to get it up.  The company's leadership blames the drooping figures mostly on a single culprit -- internet pornography.

While the company is going hard at trying to generate new revenue, it's finding an increasingly gaping hole in revenue that it can't seem to fill -- declining adult video sales.  States CFO Rob Marcus in an interview with All Things Digital:

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.

It seems rather than paying $9.99 to rent HD adult movies, dirty customers would rather find them online for free on streaming video sites or file-sharing sites/services.  As porn was typically among the high margin items that dominated cable TV revenue, the decline has sent revenues into submission.

To be fair, porn sales isn't the only factor nailing Time Warner.  While it accounts for a third of the drop in revenue, movie rentals and pay-per-view revenue (to events like boxing or the Ultimate Fighting Championship) is also down.  The net result is that while cable subscriptions remain pumping in at a steady rhythm, declining revenue from the premium content back end is sticking it, overall, to profits.

When it comes to companies like Netflix, Inc. (NFLX) and Apple, Inc. (AAPL) taking movie rental sales from Time Warner, though, Mr. Marcus emphasizes caution.  Unlike the porn sales, he says that decline may reverse its current position.  He remarks, "I wouldn't draw any conclusions quite yet."

The question, though is whether Time Warn will truly be able to come up on top of such savvy competitors.

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IF they were smart...
By EricMartello on 8/5/2011 2:32:41 PM , Rating: 3
Rather than charging a per-rental or per-viewing fee that is outdated and excessive (on top of the $150 a month fee they're already charging for internet/TV access), they should offer an option that mimics netflix. A flat $10 per month extra to have unlimited access to all on demand content, or perhaps a particular category of content.

RE: IF they were smart...
By amanojaku on 8/5/2011 4:19:51 PM , Rating: 5
I'm surprised PPV porn still exists. I hear it's censored (?!?), expensive, and you can't keep it. It's like renting a video tape of the Superbowl, only to have someone cover your eyes every time there's a touchdown. That's why I have BitTorrent and eMule. Er, I mean, a harem of supermodel alien ninja cat girls. In sailor fukus. Because I'm not so lame that I need porn.

I think back to when I had cable, and TWC regularly tacked on random porn PPV charges to my bill. I had to cut the service off eventually to stop the charges. From then on you have to call in and pay a $2 manual activation fee for a movie. Five PPVs in a year would be $10, way cheaper than the $50-$60 I got hit with every month for something I never saw. All I ever watched was Wrestlemania and such, cuz I love it when the Undertaker does it old school.

I finally got the charges removed when I explained that there's this little thing called the Internet. I can get all the porn I can afford to store for free. Funny how TWC now is suffering from the very thing I warned it about years ago. It didn't see this coming any more than it saw people using the bandwidth they were sold.

RE: IF they were smart...
By Flunk on 8/6/2011 9:32:15 AM , Rating: 3
PPV porn exists because it's the single most profitable thing that TV providers sell. I used to work for a major satellite TV company and the profit margin on porn is absurd. If you're paying then $10, chances are the producers of the film are only getting about $0.50. Porn is inexpensive to make but expensive to purchase making it a very profitable industry.

RE: IF they were smart...
By tng on 8/6/2011 11:31:46 AM , Rating: 3
...on top of the $150 a month fee they're already charging for internet/TV access...
Wow, $150? You are paying that much?

I dumped cable TV when the combined cost went to $110 and they dumped my basic cable " increase bandwidth...", then wanted to charge me rental for the STB, plus this whole thing made my QAM Sony HD DVRs useless, and there was a rental for a DVR as well.

Dumped the TV portion and kept the internet, went to Satellite and have been very happy since.

RE: IF they were smart...
By EricMartello on 8/8/2011 8:49:33 PM , Rating: 2
Did I say I was paying that? Cable bills are in that ballpark of $150 for TV and Internet. If you don't mind the drawbacks of satellite TV then it's a cheaper alternative, but for my needs I got the best value with FIOS using a combo deal.

RE: IF they were smart...
By tng on 8/9/2011 11:37:59 AM , Rating: 2
Did I say I was paying that?

No, you didn't say that, but plenty of people out there are in that boat. I have not found any drawbacks to satellite yet, sure there are some, but so far it has met my needs.

"If a man really wants to make a million dollars, the best way would be to start his own religion." -- Scientology founder L. Ron. Hubbard

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