Without saying so directly, Charter Communications' (Nasdaq: CHTR) executives have made it clear that the nation's fourth largest MSO isn't going to lie down and be stomped by over-the-top competitors. Charter, said President-CEO Mike Lovett, will leverage its potent broadband capabilities to be the first point of contact for subscribers-interestingly including non-video subscribers-who want wider access to online content.
"We intend to embrace and enable new technologies and we're in the final stages of defining our next generation video platform," Lovett said during a third quarter earnings call in which he pointed out the service provider's switched digital video (SDV) and DOCSIS 3.0 launches and TV Everywhere trial. "The video entertainment business is changing and we're embracing that change," he said, claiming Charter is "pursuing several avenues to provide online content all with the intent of delivering greater value to our customers."
In at least one instance, the online content consumer doesn't even have to be a Charter video subscriber. Charter markets an Internet and voice package called, appropriately, DUO that is "leading with our Internet product," said Ted Schremp, chief marketing officer during the same earnings call. "We feel folks that choose to make another selection for the video solutions provider should have a super broadband product in the home. Both with DOCSIS 3.0 and more generally we're finding a great deal of success."
That success in the third quarter translated into more data and phone and even digital cable customers and fewer basic cable customers. The service provider isn't necessarily mourning the loss of what at one time was its bread-and-butter: a good old cable subscriber.
"We have a superior position with our Internet product which allows us to penetrate households without a video product," Lovett said. "The margin associated with that business versus those lower-end basic video customers is significantly higher."
Those higher end subs, too, are not the typical couch potatoes. They tend to be more active and more involved with their viewing experience, going so far as to seek out unique content on the Internet and to demand it whenever and wherever they are, the basic tenet of TV Everywhere.
"We certainly see a real opportunity to continue down the path of aggregating content solutions whether they be IP-delivered content or more traditionally delivered content to pretty much any device in the home," Schremp said. "On the long-term basis we'll serve as the client for content consumption."
Getting content on that platform could be a little trickier, Lovett admitted, but the cable industry's traditional collegial atmosphere will help overcome the obstacles.
"We all have the benefit of the R&D associated with some of the bigger players and philosophically we couldn't be more aligned with where things are going from an online standpoint," Lovett said.
Charter will evolve its "healthy" relationships with content providers to move to a "successful business model for all partners into this new endeavor," he said.
While that new endeavor is yet to be defined, it will probably follow a subscription model similar to today's pay TV model and it won't be for everyone.
"We would be selling it as a product for customers that have a desire for this type of opportunity," said Lovett, noting that the biggest hurdle right now is identifying what exactly subscribers want from their service provider. the second biggest hurdle is making certain it's easy to get.
"The focus in the near term for us and the cable industry is looking at a set-top device that improves the user interface," Lovett said. "It's fairly complex to navigate today With an improved UI, I think the consumer gets significant benefit from the existing product that we offer today and in addition to that has the online capability as well."
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