Tuning Up TWC Before Handing Over the Keys

RELATED:Charter’s New Road Map [subscription required] | Charter Sets Its New Technology Team [subscription required] | Goodbye, Time Warner Cable

BOSTON — Before handing Time Warner Cable over to new owner Charter, chairman and CEO Rob Marcus gave the second largest cable operator in the nation company the equivalent of a tune-up, some body work and a new coat of paint.

It’s arguably the best the company has looked in years.

Charter officially closed on its $78.7 billion Time Warner Cable purchase on May 18, the same day it completed its $10.4 billion purchase of Bright House Networks. After the ink dries, Charter will have about 17.3 million video customers, 19.4 million high-speed data customers and 9.4 million phone customers in a footprint that includes the two largest markets in the country, New York and Los Angeles.

Marcus said the key to TWC’s success is shockingly simple: Make sure what you deliver works.


“We doubled our efforts on the nuts and bolts, making sure customers were experiencing what they were paying to experience; that the stuff worked the way it was supposed to work and when it didn’t, ensuring that we really took care of customers better than they ever have had before,” Marcus said.

Time Warner Cable ended 2015 with positive growth in video subscribers (32,000) for the first time since 2006. The momentum continued in the first quarter of this year with a gain of 21,000 video customers and revenue growth of 7.2% (its best Q1 showing in eight years), while cash flow increased 8.2% (its best Q1 in six years).

“In TWC’s most recent chapter, CEO Rob Marcus and chief operating officer Dinni Jain have steered the ship through a two-year merger pendency that might have understandably crushed morale and results,” MoffettNathanson principal and senior analyst Craig Moffett said in a recent research note. “It didn’t. It is an extraordinary achievement that the company’s employees have not only maintained the asset, but have spurred TWC to its best operating performance in years.”

Marcus also gave a lot of credit for the turnaround to Jain, who joined TWC on Jan. 13, 2014, the same day Charter lobbed in an offer to buy the company for $130 per share.

“Would the execution have been as successful if he [Jain] were not here? I suspect not,” Marcus said. “Beyond that, both he and I gave opportunities to some really talented other executives in the company who had been with us, but just hadn’t been given much latitude to really do all they could do to contribute to our success.”

Through it all, Marcus and his team kept their focus through Charter’s first offer — and a brutal conference call where management sharply criticized TWC’s leadership, a move that Marcus later used as a “rallying cry” for employees to do better — followed by a 2014 bid by Comcast that was shelved less than a year later and a much-richer Charter deal. At the close, the Charter offer valued TWC at about $200 per share, $70 per share better than the January 2014 bid.


In an interview the day before the Charter deal closed, Marcus was reflective and a little sad to leave behind what he considered his dream job. As a young lawyer fresh out of Columbia Law School and working for Time Warner Inc.’s outside counsel, Paul, Weiss, Rifkind, Wharton & Garrison, Marcus said one of his first assignments was to take American Television and Communications (ATC), the predecessor company of Time Warner Cable, private so the assets could be included in Time Warner Entertainment, a complex vehicle created in the early 1990s to help alleviate some of Time Warner Inc.’s massive debt load.

“I’ve been in and around this company for 25-plus years,” Marcus said. “And on Thursday [May 19], it will be the first time in my working life that I haven’t had an affiliation with this company.”

Marcus leaves an industry at a crossroads, with new threats from over-the-top players and so-called skinny bundles. The now-former TWC chairman and CEO said the reports of the death of cable are premature.

“My expectation is that we’ve still got runway,” Marcus said. “There is a lot of juice left for things we haven’t tried yet.”

Marcus doesn’t believe OTT players will disappear — he expects more to come on the scene — but he sees the relationship between OTT companies and pay TV evolving. “I think there will be more mixing and matching,” he said. “I’ve been a longstanding believer that over-the-top video is the killer app for the sale of high-speed data, so the guy who has the best Internet pipe is going to benefit.”

Marcus also said the industry may be getting too complicated with the skinny bundle concept and that the most popular offering could be the simplest: a full programming bundle, minus sports networks like ESPN.

“For some customers, if you could reduce their bills by $20, which I think you could be reducing [exclusive] sports, that might be an interesting alternative,” Marcus said.

While Verizon Communications’s attempt to do something similar — its Custom TV package initially didn’t include ESPN — didn’t work out, Marcus said subscribers still could get plenty of sports through broadcast and cable networks like TBS and TNT. “I think someone will try it soon,” he said.

Marcus also was excited about the evolution of apps like TWCTV, which he sees as the main delivery vehicle for video in the future.


“We’ve already moved to a world where the video app replicates our video experience,” he said. “The key is when that becomes the only experience. The only thing that is holding us back on that front is compliance with the FCC.”

Marcus said the Title VI regulatory requirements for closed captioning, emergency alerts, and coding for local PEG channels have held back apps becoming the main vehicle for video delivery. But he said in its New York City IPTV trial, TWC has done just that.

Outside the home, programming rights are the main obstacle. But that could change as more operators push for national rights. “I’ve never thought it was very compelling for any of us to launch service over-the-top, but to have customers in our territory have the ability to access what they are already paying for at home when they’re on the road is a very compelling value add,” Marcus said. “Those are two very different things.”

Marcus said he hasn’t decided his next move — over the short term, he may get some sun and spend time driving his kids to school. Being chairman and CEO of Time Warner Cable is a hard act to follow, he said.

“What you don’t want to do is make the next thing a second seat to what you’ve already done,” Marcus said. “You want it to be something you’re excited about. Finding out what that is going to be, the bar is pretty high. Even being under siege for two to three years, it was pretty fun. It was exciting in every way. I was challenged: It drew on everything I had.”