Charter CEO: Too soon to blow up existing pay TV distribution model

Despite the realities of cord cutting and an expanding world of streaming options, Charter CEO Tom Rutledge said it’s a little too soon to completely ditch the traditional linear TV model.

Speaking today at a MoffettNathanson investor conference, he said that content distributors would be much better off not blowing up the existing model just now. Rutledge said it still produces an enormous amount of money, particularly relative to what their direct-to-consumer opportunity is. To the extent that they want to get pricing power out of their existing distribution, he warned that they could overdo it and end up not being carried in the traditional bundle.

“On the other hand, if they keep their rates low or don’t raise them or make them go backwards, they are still going backwards, it doesn’t feel very good and it’s hard to do as a business, but it’s better than the alternative,” he said.

Rutledge is likely referring to recent direct-to-consumer launches like Discovery+ and Paramount+, which have been redirecting some content away from the traditional bundle toward streaming.

RELATED: Charter loses 138,000 pay TV subscribers in Q1

Of course, part of Rutledge’s argument for maintaining the bundle stems from his company’s relative success with holding onto video customers. Charter’s video subscriber base has been shrinking at a significantly slower rate than the rest of the pay TV industry.

After two consecutive quarters of surprising growth last year, Charter lost 138,000 video subscribers in the first quarter of 2021. During the same quarter, Comcast lost 491,000 subscribers and AT&T lost 620,000 video subscribers.

When asked why the company’s video service seems to be much stickier than its peers’ comparable offerings, Rutledge said his company’s big bundle combo packages are still shrinking but are being offset by shifting customers into different, less expensive video products.

“There’s a lot of pressure on the big, fat everything [video] product because it’s very expensive and we’re somewhat masking that with our marketing tactics,” he said.