Cable TV Discovers Fewer People Want Its Services

Now that the battle for cable television franchises in the San Gabriel Valley is all but over, cable companies are discovering a surprise: Not as many people want their service as they thought.

Falcon Communications, which has emerged from the franchise battles as the valley’s largest cable operator, said only 36% of its potential customers are subscribing--far below 50%, the statewide average for cable systems and the percentage that Falcon has had as its goal.

Yet Falcon is doing better than some other cable companies in the area. Heritage Cablevision in South El Monte has signed up just 16% of its potential customers and TCI Pomona has captured only 26% of its market.

Cable operators offer a number of reasons for low subscribership: good over-the-air television reception, the abundance of local channels, competition from videotape recorders and rented movies, and the Southern California outdoor life style.

To attract subscribers, cable companies are putting a new emphasis on marketing, from direct mail to television commercials to telephone solicitations.

The San Gabriel Valley has turned out to be a surprisingly tough market, said John Kobara, director of operations for Pasadena-based Falcon Communications. Falcon, with nearly 50,000 subscribers locally, has more subscribers in the valley than all the other cable operators combined, but it would have another 17,000 customers if it had met its own projection that it could capture half the available homes.

Falcon has won 17 of the 20 franchises it sought, including franchises for Pasadena, Alhambra, San Gabriel, Temple City, Monterey Park, West Covina and Walnut. Kobara said the company has invested $100 million in plant and equipment and still expects to become profitable in a few years even though making money with cable has turned out to be harder than expected. One unpleasant surprise for cable operators, Kobara said, has been the number of people who try cable and find they either cannot afford it or don’t need it. Kobara said in some communities more than 40% of the customers quit the service within the year. Half of those disconnecting are simply moving, Kobara said, but others have decided that cable isn’t worth the cost. At Falcon, for example, a subscriber can spend from about $10 to $30 or more a month for the different levels of service.

Kobara said the high disconnect rate has forced cable companies to expand their marketing efforts, rethink their systems and look for new ways to attract subscribers.

In areas where over-the-air reception is poor, such as in the foothills, Kobara said, families will subscribe to cable because it is the only way to get decent televison reception. But in the San Gabriel Valley’s flatlands, with a direct line to the television towers on Mt. Wilson, reception of some stations is sometimes better from rooftop antennas than through cable, Kobara said. Although the difference in picture quality is slight, some customers have quit cable because of it.

Reception by antenna is particularly good in the west San Gabriel Valley, Kobara said, and that may help explain why only 28% to 32% of the potential subscribers in Pasadena, Alhambra and Monterey Park have signed up for cable, compared to 60% in West Covina and 72% in Walnut.

What makes the San Gabriel Valley and the entire Los Angeles area different from most cable markets in the country, Kobara said, is the high number of local stations. In many other places, only four or five stations are available without cable, Kobara said, but local residents can pick up 18.

Kobara said cable is being hurt by the competition from videotape recorders because people regard renting video movies as a cheap alternative to cable. But eventually, he believes, owners of video recorders will want to hook up to cable because it will give them much more to tape.

The influx of Asian immigrants in Monterey Park and Alhambra has complicated things for Falcon, Kobara said. To appeal to Chinese-speaking customers, Falcon started the Jade channel, carrying programs from a Hong Kong television station on a subscription basis. The channel has attracted 1,500 subscribers, Kobara said, but the percentage of Asian families who are cable customers is still far below their representation in the general population. Neither Rich or Poor

Kobara said the people most likely to subscribe to cable are families that are neither poor or rich. The poor can’t afford cable and the rich are too busy to watch, he said.

Robert Fisher, general manager of American Cablevision, a Time-Life company that serves San Marino and South Pasadena, said he has heard that affluent areas are a poor cable market, but cable is reaching one-third of the potential subscribers in San Marino. And once subscribers do sign up in San Marino, he said, they are less likely to disconnect than subscribers elsewhere.

Many cable companies offer local programming, televising high school football games, parades, soccer matches and council meetings. And they offer free training to people who want to create programs on local access channels.

But local programming has not become a major incentive for people to subscribe to cable, Fisher said, adding, “If that was all I had to offer, I’d have been out of business a long time ago.” Home Box Office

Fisher and other general managers said most customers subscribe to get access to Home Box Office, Showtime, the Disney channel and other pay services.

Although the basic rate at Falcon is $9.95 a month, most customers add HBO and other pay services, pushing the cost to $25 or $30 a month.

In addition to the pay services, cable delivers all sorts of specialized programming, from live coverage of Congress to sports and music videos.

But in spite of the variety, Harold Horne, a cable television consultant based in Virginia, said cable systems are having trouble holding onto viewers because of a “dearth of good programming.” Viewers are finding that there is no particular advantage to having available 48 boring programs instead of half a dozen, he said.

Outlook Called Good

The economic outlook for the cable business is still very good, Horne said, particularly because federal legislation prevents local governments from regulating cable rates.

Horne, who serves as cable consultant to the City of Claremont, said it became apparent last year that cable companies were becoming much more cautious when Group W refused to accept a franchise in Claremont after submitting the winning bid. Group W said it had recalculated the cost of building a system in Claremont and arrived at $9 million, instead of $8 million, so it no longer wanted the franchise.

Claremont readvertised and is now weighing two proposals, from the Masada Corp. of Birmingham, Ala., and Daniels & Associates of Denver.

Claremont is one of the few San Gabriel Valley cities without a cable system. Among the others, Baldwin Park is negotiating a contract with United Cable Television; Rosemead is negotiating with Falcon Communications and La Verne is considering whether to award franchises to two companies that already serve parts of the city.

Irwindale, Industry

Irwindale and the City of Industry are the only other San Gabriel Valley cities without cable service.

The smallest cable company is Kinneloa Television Systems, which Melvin Matthews, who was then an engineer at Rockwell International, started in 1969 because he couldn’t get television reception at his home in Pasadena. Matthews rigged up a system and shared the reception with a couple of neighbors and soon found himself in the cable business.

Matthews said his company now has 900 subscribers in a foothill area that includes a tiny part of Pasadena and adjoining unincorporated area. And Matthews is also operating Duarte Cable Communications, which is leasing and running a cable system for the City of Duarte.

Only Municipal System

Duarte City Manager Ken Caresio said that after years of problems, Duarte revoked the franchise held by Acton Cable TV in 1982. The cable company sued the city in state and federal courts and the city’s action was upheld. Next, the city moved to acquire the system by condemnation and recently completed the purchase for $235,000. Duarte will spend $3 million to rebuild and complete the system, which Caresio said has never worked satisfactorily. Duarte will have the only municipally owned cable system in the valley.

Acton’s other area holdings were recently purchased by Foothills Cablevision, whose main partner is Daniels & Associates. Brett Miller, regional manager, said more than $1 million will be spent to upgrade the system, which serves Bradbury, Glendora, San Dimas, Monrovia and parts of Pomona and La Verne.

In Covina, the cable franchise is held by CommuniCom, which filed for protection from creditors under Chapter 11 of the federal bankruptcy laws last February. CommuniCom, which has nearly 50,000 subscribers, mostly in Los Angeles and Culver City, plans to retain its Covina franchise and is operating in La Verne, though ownership of the system there has passed to one of its creditors, Security Pacific National Bank.

Low Number of Subscribers

Despite the comparatively low number of subscribers, most cable company general managers said they believe the business has a bright future in the San Gabriel Valley.

Kobara said Falcon Communications is finding a strong new revenue source in the sale of local advertising, inserting ads on MTV, ESPN and other channels. Kobara said Falcon will gain $700,000 to $800,000 in ad revenue this year.

Bram Goodwin, general manager of TCI Pomona, said those who are disappointed in cable should remember it is just beginning.

“Cable TV as we know it is only 5 or 6 years old,” he said. “How many industries grow to maturity in five or six years?”

CABLE CLIENT FIGURES

(Figures show number of subscribers reported by cable companies and the number of homes that could hook up to cable. * Denotes cities with systems only partially built. N/A means not available.)

Current Total Hookups

City Subscribers Possible

Alhambra 6,974 24,685 Arcadia * 1,600 3,000 Azusa 3,500 11,500 Bradbury * 40 95 Covina 2,441 10,000 Duarte * 375 1,000 El Monte 6,700 17,000 Glendora 3,885 12,500 Monrovia 1,972 11,000 Monterey Park 6,142 19,210 Pasadena * 6,600 22,710 Pomona * 4,600 18,000 San Dimas * 682 3,000 San Marino 1,500 4,500 Sierra Madre 5,738 7,744 South El Monte 760 4,900 South Pasadena 3,500 9,300 Temple City 3,947 10,791 Walnut 2,747 3,800 West Covina * 7,281 12,186

UNINCORPORATED AREAS

Current Total Hookups

Areas Subscribers Possible Altadena * 9,520 22,495 East Pasadena South Monrovia South San Gabr Bassett 8,000 34,000 Hacienda Heigh Valinda West Whittier Diamond Bar 8,000 20,000 Rowland Height

CITY FRANCHISE BREAKDOWN City Cable Company

Alhambra Falcon Communications Arcadia Group W Azusa Jones Intercable Baldwin Park None Bradbury Foothills Cablevision Claremont None Covina CommuniCom Cable TV Duarte Duarte Cable Communications El Monte Group W Glendora Foothills Cablevision Industry None Irwindale None La Puente United Cable Television La Verne None Monrovia Foothills Cablevision Monterey Park Falcon Communications Pasadena Falcon Communications Pomona TCI Pomona Cable TV Rosemead None San Dimas Foothills Cablevision San Gabriel Falcon Communications San Marino American Cablevision Sierra Madre Group W South El Monte Heritage Cablevision South Pasadena American Cablevision Temple City Falcon Communications Walnut Falcon Communications West Covina Falcon Communications

COUNTY AREAS

City Cable Company

Altadena Falcon Communications Bassett United Cable Television Diamond Bar Jones Intercable Southern E. Pasadena Falcon Communications Northern E. Pasadena Kinneloa Television Systems Hacienda Heights United Cable Television Rowland Heights Jones Intercable South Monrovia Falcon Communications Valinda United Cable Television