Time Warner’s Turbo Flop

Time Warner really needs to get their collective heads on straight for their future.  The defense of  “those who use more should pay more” is fine until they pair it with the lie that their costs go up when their customers use more.

Using publicly accessible financial statements filed with the SEC and readily available on Google Finance, Time Warner’s total revenue has nearly doubled from $8.8 Billion at end-of-year 2005 to a whopping $17.2 Billion at end-of-year 2008.  Gross profit has mirrored those numbers, growing from $4.9 Billion in 2005 to over $9 Billion in 2008. The percentage  increases are as close as you’ll see to a 1:1 revenue-to-profit ratio.The argument that expenses have increased are grossly understated as well.  In 2005, General and Administrative expenses were $1.5 Billion.  In 2008, $2.8 Billion.  Again, the same ratio as revenue and gross profit.

The Line item for “Unusual Expense” is more interesting:  $42 Million in 2005, up slightly in 2006 and down to $23 Million in 2007.  Mysteriously, there is a $14.9 Billion figure in 2008. Presumably that would be the big set-up before this fall out.  But, through 2007, revenue and profits went up, operating costs went up proportionately and “unusual” costs went down.

Let’s give them the benefit up the doubt and call 2008’s massive $14.9 Billion expenditure a system upgrade. It’s not a “usual” expense.  It would be a capital improvement expense for  more fiber, better equipment (although my service hasn’t changed and I’m still using an out-dated cable modem and waiting on DOCSIS 3.0).   Looking at the financial trends,  that all the experts like to look at, tell me how that won’t be recouped in about two years?

Time Warner – who are you trying to play at here?

You realize your customers have been using your Internet service to be able to access this kind of public, readily-available information.  As a result, we are now a world of more intelligent consumers.  It’s marketing 101: build a relationship with your customers.

Time Warner COO, Landel Hobbs as quoted in E-Week:

No, sir you haven’t.  Please explain to us how increased bandwidth usage increases your costs. At the top-tiers of Internet backbones, companies are charged for the capacity of their connections, not for the amount of data passing through them.

Mr Hobbs:  your public-record financial numbers do not match the costs you are claiming.  You cannot justify a more-than-tripled price point for a service without justification.

But it would seem that Mr. Hobbs is making quite a few really interesting statements recently.  Ars Technica is reporting Hobbs has some choice words about FCC about getting bailout money and why this is “not the time, nor…the appropriate proceeding to engage in a debate about the need for net neutrality.”

From Matthew Lasar in that same article:

Golly gosh, an observer might wonder, when exactly would be the right time to have a discussion over at the FCC about bandwidth cap plans that potentially ding consumers for accessing non-cable provider video content?

Mr Hobbs:  You cannot pretend that limiting Internet service and restricting free Internet consumption does not infringe upon the fundamental concepts of Net Neutrality.

Time Warner is truly trying to pull a fast one on their customers in an apparent greed that is scarily similar to the financial sector’s greed.  Perhaps this is why they’re rolling this service out in select markets where you have no other threat of competition?  I see you’ve done your SWOT analysis.  Now try some customer relationship building before it’s too late.

2 thoughts on “Time Warner’s Turbo Flop”

  1. Great post. At the end of the day this sort of disregard for customers always costs the company in the end. History repeats itself as succesful businesses become so deatched from their customers that they look at them with disdain. Lets hope Time Warner get theirs… and soon!

  2. To claim outrageous costs (thus charging more to customers) that are inaccurate is the kind of nonsense that will make you lose TONS of business. Customers, such as myself, feel used when seeing this dishonesty. Honesty is a high value amongst many people, and to blatantly lie to your target market for profit is disgusting.

    Establishing a positive relationship with your customers base can be seen as a competitive advantage. Time Warner needs to do some serious work in this department.

    @Paul G – Great point, “disregard for customers always costs the company in the end.” And it should!

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