On Friday, Chris Winfrey, the Chief Executive Officer of Charter Communications, expressed his intent to shift to a different style of pay-TV model as the break away from cable tv continues. Mr. Winfrey called for greater adaptability in terms as well as for the supplying of ad-backed streaming options to Charter's current pay-TV consumers with no extra cost. His demand for changes occurred at a time when Disney's networks, like ESPN, had ceased broadcasting for customers of Spectrum TV.
Chris Winfrey, CEO of Charter Communications, conveyed on Friday that negotiations with media content companies would be different, and that the industry should get on board with a new model. The cause of this shift is attributed to the Disney-owned networks going dark on Charter's Spectrum service. This is representative of the long-standing issue of rising fees, usually with pay-TV distributors like Charter resisting higher rates. The highly-anticipated U.S. Open and NFL season have often being the impetus for preventing channel disruption for customers, but Winfrey indicated that this time it's different. He suggested that the existing pay-TV model is no longer viable, given the decrease in Charter's subscription rate from 14.7 million customers and the increasing shift towards cord-cutting. Charter is hence looking into flexible packages and other advanced technology involving components of both streaming and traditional TV to retain the bundle, yet at lower prices.
Streaming has revolutionized the television industry with inexpensive subscriptions offering a ton of content, much of which is also broadcast on pay-TV networks. Consumers are rapidly replacing pay-TV bundles with streaming options, which has only grown in the past five years. Although companies such as Disney, Warner Bros, Discovery, Paramount Global and NBCUniversal are attempting to make streaming viable, they still rely heavily on revenue generated by pay-TV networks as well as TV content that's often made available on streaming platforms. Media mogul Barry Diller suggested that the legacy media companies should return to focusing on broadcast and pay-TV networks, due to their superior profitability compared to streaming. Tom Rutledge and Winfrey have often spoken of the considerable fees pay-TV providers collect, which get passed on to customers and thus encourage cord-cutting. As Charter still loses fewer pay-TV customers than its rivals every quarter, streaming has made it tougher for them to sustain these costs. Additionally, programs and movies featured on cable networks often quickly make their way to streaming services — sometimes just a day later. Furthermore, more live sports are becoming available on streaming. For example, NBCUniversal broadcasts Sunday Night Football on both its streaming platform Peacock and on traditional TV, while Paramount follows suit with a Sunday football package on Paramount+ and Disney shows some, though not all, Monday Night Football games on ESPN+. On Friday, Charter declared they would pay the higher fees Disney was asking for, in exchange for a lower term of minimum penetration — implying they'd guarantee fewer customers to control expenses. Disney's networks are the more expensive ones; ESPN, for instance, receives $9.42 per subscriber a month based on S&P Global Market Intelligence data. Furthermore, Charter is also eager to advertise Disney streaming apps to its broadband-only clients, seen as a way to help Disney begin offering ESPN's live feed as a direct-to-consumer streaming service — although currently ESPN+ offers only limited content. Disney declared on Friday that their traditional TV channels and streaming services are not the same, but complementary. They also mentioned their immense investments in exclusive content for Disney+, ESPN+ and Hulu. During the investor call on Friday, Winfrey remarked that the negotiations with content providers would move forward like this — a significant change for the pay-TV provider.
During Charter's second-quarter earnings call in July, Winfrey stated that the company was focused on trying to create a viable future for traditional TV bundles. He added that if they could come up with the right way to package and price it, it would be beneficial for customers, the company, and ultimately the programmers in the long run as opposed to cord cutting developing at the current pace.In the same vein, the company announced a plan for a cheaper, sports-lite bundle at the same time, that removed regional sports networks from the equation allowing customers that don't watch their local teams to have access to a more affordable option without completely cutting the bundle. This comes as the regional sports industry has experienced a steep drop-off, highlighted by Diamond Sports Group being forced to file for bankruptcy protection. There are, however, other networks providing streaming options currently. Nevertheless, the major national sports networks including ESPN are included in both bundles and Winfrey stated he would have loved to offer ESPN in a sports-only bundle, but noted it would be a stretch too far for Disney.To continue to revamp the pay-TV model in an effort to slow down losses, Charter joined forces with Comcast, the largest US pay-TV provider, to launch a product later this year allowing customers to receive the pay-TV bundle without a cable box. It was mentioned that two-thirds of Charter's pay-TV sales are conducted without a cable box meaning people are utilizing the Spectrum TV app on their personal devices like Roku or Apple's Apple TV.The upcoming product, branded with Comcast's Xumo, will combine the traditional TV bundle with streaming apps in one place, creating a more seamless transition between the two for consumers. The firm is betting that the service, plus more affordable and flexible bundle rates, will keep pay-TV afloat.Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.
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