Charter sees breaking point approach for the pay TV bundle

Charter Spectrum broadband
Charter CFO Chris Winfrey said that if distributors like Charter can’t get lower rates, more flexibility or both, that there will be “very serious discussions around directing our customers to alternative ways to view that content.” (Charter Communications)

Charter still values being able to sell traditional video packages alongside its broadband products but CFO Chris Winfrey suggested that a breaking point is coming.

Speaking today at an Evercore investor event, Winfrey reaffirmed that video is still an in-demand product and that it’s still profitable for Charter. But he warned changes are needed to ensure that his company can continue assembling attractive products that can be packaged for different customers with different budgets.

“The pricing of that continues to go up and it’s become unaffordable for a large portion of the population as a result of what the programmers have done. We’ve eaten a lot of that but we are now passing through those programming increases to our customers,” he said.

Winfrey said a point is coming where certain content will either be dropped or need to present more flexibility for operators to package in a “really different way to create value for consumers.” He said the industry is heading toward that point not only because of programming price increases but also because programmers are making their content available via streaming platforms at low rates or, in some cases, for free.

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“In some cases that’s intentionally for free and in a lot of cases it’s unintentionally for free because there’s no security attached to the DTC platform that they’re distributing. Passwords are being actively shared and there’s really nothing being done to stop it. So, their content is being devalued in every way and at the same time they’re asking consumers to pay more and not have flexibility on packaging. I know we’ve been talking about this for years, but I think those days are numbered and something has to give.”

Winfrey said that if distributors like Charter can’t get lower rates, more flexibility or both, that there will be “very serious discussions around directing our customers to alternative ways to view that content.”

Winfrey’s comments today echo what Charter CEO Tom Rutledge said last month at an investor conference, where he professed that traditional MVPD distribution deals can still be lucrative for programmers but that affiliate fees may need to shrink to avoid blowing up the bundle entirely.

“…If [programmers] 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, suggesting that continuing to push affiliate fee increases could result in non-carriage.