Even though Charter Communications is losing video subscribers, CEO Tom Rutledge says he doesn’t worry about the growing number of lower-priced streaming services such as AT&T’s DirecTV Now and Dish Network’s Sling TV.
“The story from the programmers and some of the virtual MVPD operators was that this was going to grow the market,” he told analysts this morning. “If you take a look at the evidence so far, the current [over the top] offerings just seem to be cannibalizing the same satellite providers’ own base. It’s just a shift.”
He added that “none of them has a product that’s better than ours.”
If that dynamic changes, Charter “has all the rights and all of the technical capabilities and the programming” to sell similar streamed products.
Indeed, the CEO said it has the rights to sell a streamed service both inside its current service areas and outside, which would be tantamount to a declaration of war on other cable providers.
“We haven’t done that because we haven’t seen an opportunity to create new customer relationships out of that that have a high value to us,” Rutledge said. “But we certainly have the capability.”
Even so, the CEO said he sees “a general decline in the [pay TV] marketplace that is mostly price-driven.” That trend “is unlikely to change in the near term but not particularly accelerate.”
He still believes Charter can do well by raising prices and adding services that customers will see as a good deal — including his recent agreement with AMC Networks to produce shows exclusively, at least in the U.S., for Charter customers.
Rutledge called the AMC deal “an experiment to see if we can create some high-value product for our customers.”
He’s interested in making similar deals, while planning to integrate Netflix into Charter’s user interface and talking to YouTube about a similar initiative.
“It’s been our strategy to create high-value, high-quality products that improve the life of the customer,” he said. That will keep subscribers from “looking around and trying other competitors” while the cable company tries to use “temporary friction in the marketplace to get a rate.”
Rutledge pointed to “our two-way interactive footprint and our capability to provide [subscription video on demand] in an appropriate user interface along with the kind of linear channels we’ve historically provided and other on=demand services.”
CFO Christopher Winfrey said 83% of the customers Charter picked up last year when it bought Time Warner Cable and Bright House Communications still pay the former companies’ lower rates.
“Until we either migrate or churn the legacy base,” he said, “we’re going to have a little bit of volatility from one quarter to the next” — although he said “it’s already started to get better from here on out.”
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