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THE MORNING BUZZ: Can You Say Overcount? I Bet You Can

11 Jun, 2002 By: Holly J. Wagner

I'm not into tooting my own horn about predicting disaster, but watching the cable and satellite industries implode like telecommunications did last year – and primarily for the same reasons – has me in the mood to say I told you so.

Since early this year I have carped, off and on, that following the telco business model would lead cable and satellite providers right into the same toilet the telcos are circling.

Among the revelations surfacing recently is that cable and satellite companies have a very different idea of how to count customers from what most of us would think is common sense.

These companies count anyone who has ordered or purchased the set-top box as a customer, whether or not they ever sign up for service. Recent disclosures have DirecTV admitting to overcounting by about 20 percent and Adelphia copping to inflating its count by about 10 percent.

What's worse, Jupiter Media Metrix analyst Lydia Loizides recently told me that's standard operating procedure for these industries and wondered aloud what all the fuss is about. I, on the other hand, can't help wondering why shareholders have been letting them count eggs as chickens.

Just think how the packaged video industry would operate if we used the same practices these industries use?

Let's see, we could start by counting every phoned-in or online reservation as a rental, whether the customer ever picked it up or not. After all, the customer expressed the intent to rent it, so sooner or later they will, right? There's one in the bag.

Now that the logic is working, we can start counting everyone who inquires about a title's street date as a rental. Sure, they'll be back. They have players, so they must be customers.

But why stop there?

We can count potential customers in the marketing area surrounding stores we plan to open next month or next year. After all, we're investing in the infrastructure so the customers will come, right? Rack up a few more.

I can just picture our indie friends explaining this to their shareholders (mainly their families): “It's OK honey, we can eat next week. That's when the customer will actually rent what he expressed an interest in. Until then we'll chew on our anticipation.”

Or lend a whole new, literal meaning to cooking the books.

But wait, there's more! Not only does this method let you count customers you don't really have, it lets you pillage the business when you want or need money, quit and then offer to help bail the company out when it tanks.

That's what former CEO Gary Winnick is doing with telco Global Crossing. The Rigas family loaned its members oodles of Adelphia money and resigned under pressure. They should be able to pick Adelphia up for a song once it goes into bankruptcy, which is expected any day now.

Don't forget to blame your accountant. That's all the rage these days. Disclose every video rental you ever fudged, then fire and blame your accountant.

Now that we're all marching in line behind those telcos, we can start giving the rentals away for free to everyone who is not already on the customer list.

In my market, Adelphia started offering six months of free service for new subscribers right after news broke that it was headed for the dumper. DirecTV has, since last October, been offering free dishes and set-tops with installation (by the way, six months and as many phone calls after I signed up, I finally got my installation rebate).

So why bother staffing your store when you can just stack the videos out front and let non-customers help themselves? Think of the reduced labor costs!

I tell you, these companies are onto something. They must be, or companies that should have made potential investors laugh wouldn't still be with us. Then again, there's a good chance that in a few weeks or months, some won't be.



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