Charter President and CEO Tom Rutledge made it clear, amid another quarter of lost video subscribers, that his company’s video business was no longer built to go it alone.
“We’re going to use video aggressively. But what we’re saying is, it really isn’t a standalone product in its current situation,” Rutledge said during today’s earnings call.
The comments from Rutledge came after Charter gave back another 73,000 residential video subscribers during the quarter, which was an improvement over the previous quarter and the year-ago quarter. Though Charter has been slowly leaking video subscribers, Rutledge said providers and programmers still have an interest in keeping the video business going.
“There are a lot of forces still holding the traditional MVPD relationships together,” Rutledge said. He mentioned Disney buying Fox as evidence of that and pointed toward large content companies that control significant linear and sports content.
“While there is some degradation in the whole relationship and it has become overpriced in many cases and is actually pushing people out of the market place, video consumption is still high,” Rutledge said. But he said some of that viewership is because virtual MVPDs and TV Everywhere apps have weak security that allows many users to access their content lineups for free. He also said that password sharing on OTT products also keeps viewing high while not contributing revenue to the video market overall.
“All of that it putting pressure on traditional video but at the same time, [traditional video distribution] is the perfect way of selling content so it isn’t just going to go away overnight. How fast? I don’t know. But I think we can manage our way through it and use video to drive relationships for the foreseeable future,” Rutledge said.
As the video business declines at Charter so too is the company’s capex around customer premise equipment like its WorldBox 2.0. BTIG analyst Walter Piecyk said that Charter’s CPE capex was down 19% year over year and 11% sequentially, compared to Comcast, which was down 24% year over year and down 12% sequentially.
“Charter’s CPE capex was down 19% y/y and 11% sequentially. This compares to Comcast, which was down 24% y/y and down 12% sequentially. Charter expects overall capex to decline in 2019, which we assume is driven by CPE and likely indicates that WorldBox will not play a critical role. At Apple’s WWDC, it profiled Charter as a partner in using the AppleTV to deliver Charter’s bundles. Charter has not responded to our questions about whether a primary set-top box would be required in conjunction with the utilization of an AppleTV,” Piecyk wrote in a research note.