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Time Warner Cable to test cheaper TV package

Cable operator is offering price-sensitive consumers a lower-cost option with new "TV Essentials" package, which excludes live sports and other cable programming like Fox News and MSNBC.

Time Warner Cable will soon test a less expensive cable TV package called "TV Essentials" as the company tries to cater to lower income consumers.

Time Warner Chief Marketing Officer Sam Howe provided details of the new low-end video offering for the first time at the SNL Kagan Cable MSO Summit in New York on Thursday. The new package will be offered as a test in New York City starting Monday, where it will cost $39.95 per month. It will also be offered in parts of Ohio, where it will be priced at $29.95 per month. These are promotional offers and the price will go up to $49.99 per month after one year, the company said.

The service will include all local broadcast stations and major broadcast channels, as well as 12 of the most popular 20 cable channels. But there will be some notable channels missing in this version of the service including, ESPN, Comedy Central, TNT, Fox News, MSNBC, Fox regional sports, and MSG.

The paid TV industry has been losing TV subscribers over the past two quarters. Cable operators have been blaming the weak housing market and the slow economy as a reason why people are canceling cable TV service. In total, taking into account losses and gains between different types of providers, the paid TV market lost a net 119,000 subscribers in the third quarter, compared with a gain of 346,000 during the same quarter last year, according to research released today by SNL Kagan.

Specifically, Time Warner Cable reported in the third quarter that it lost 155,000 video subscribers of which about 46,000 were digital video subscribers.

Craig Moffett, a Wall Street equities research analyst with Sanford Bernstein, noted in a recent report that 40 percent of U.S. households have no disposable income to pay for services, such as cable TV. And he called on the cable industry in particular to revisit pricing to address the low end of the market.

The new "TV Essentials" package is designed to do just that. CEO Glenn Britt hinted at the new scaled-down version of the service during the company's third quarter conference call earlier this month.

"We recognize there is a segment of our population and economy under economic duress," Britt said during the call. "And it's important for the broader industry to be responsive to that. So we have sought in our programming negotiations to get more flexibility [to offer lower cost packages.]"

While the promotional pricing of the new service is lower than existing tiers of service, it still may not be low enough. Time Warner Cable's expanded basic cable package costs about $50 per month. And its basic digital cable costs around $60 per month. Prices vary between different markets, and promotions also vary by region.

Meanwhile, consumers with broadband services can still get video content for much less. Hulu has just reduced the subscription price of its Hulu Plus service, which provides access to recently aired shows on TVs, to $8 a month. And Netflix subscribers can stream as many movies and TV shows from its on-demand service for $9 a month. These services, when used in conjunction with free over-the-air TV that uses an antenna, would provide a similar breadth of programming to consumers as the new "TV Essentials" package, which excludes most premium live local and national sports broadcasts.

But it seems the group Time Warner is really addressing with this offer is not the group of consumers who subscribe to broadband and are looking to cut the cord. Instead, the target audience appears to be consumers who do not subscribe to broadband or phone service, since the new "TV Essentials" package will not be eligible for any of the broadband and phone bundle discounts the company offers.

There are other limitations of the service, as well. The Wall Street Journal reports that the service will not include high-definition programming, DVR capability, or free on-demand programming. But it will offer paid on-demand service, such as newly released movies.