Pay-TV Bundle Is Getting “Priced Out Of The Market,” But Charter CEO Remains Bullish On Video Business

Charter Communications CEO Tom Rutledge sees the pay-TV bundle continuing to shrink because it has been “priced out of the market” during the streaming era. But video will remain a key part of the company’s strategy.

“Live TV will continue to be sold in a linear package for a significant period of time,” he said during an online session today at Morgan Stanley’s annual Technology, Media & Telecom conference. “There are a lot of customers and users who enjoy that experience. But it is being priced out of the market in many ways and the new streaming and on-demand products really haven’t been successful from a linear perspective yet. Obviously they’re gaining some traction in the marketplace.”

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Charter bucked the trend in 2020 and actually added a small number of video customers, Rutledge noted. It has been the No. 2 U.S. cable operator after Comcast, reaching about 16 million video subscribers. MVPDs like Charter have recently prospered by selling broadband service, which is increasingly vital to remote work and video streaming.

The overall pay-TV subscriber population has been declining rapidly as lower-cost video options proliferate. Industrywide, pay-TV penetration fell to 65% last year, according to Wall Street research firm MoffettNathanson, compared with a peak north of 87% in 2009. About 5.1 million customers left the overall bundle in 2020, at the same time tens of millions of subscribers signed up for streaming services during the onset of Covid-19.

The negative momentum doesn’t change Charter’s value as a video provider, Rutledge argued.

“I think we can manage our video relationships with customers going forward and we can sell streaming packages and be a storefront and an aggregator,” he said. “The industry will segment into much narrower niches. People still spend a lot of time on the big screen and there’s an opportunity there for us to be the best provider of those products because of our customer relationships, and to have a higher-quality product and a more valuable product.”

For Charter, he added, “It’s important that we be a video connectivity company as well as a broadband company and a mobile company. We need to satisfy a customer’s full range of connectivity issues.”

Moderator and Morgan Stanley media analyst Benjamin Swinburne asked Rutledge about Charter will continue to make distribution deals with media companies even as they push direct-to-consumer streaming. “I think we’ll do both kinds of deals,” the executive said, meaning OTT and linear. Disney and NBCUniversal are recent distribution partners who fall under that heading.

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