Deeper Dive—What AT&T, Charter and Comcast said this week about cord cutting

cord cutting
This week AT&T, Charter and Comcast all had a chance to expound on the future of pay TV during investor conference interviews. Here’s what they said. (Alyssa & Colin/Flickr)

AT&T, Charter and Comcast are ready to turn the page on a historically bad year for video subscriber losses, but 2020 could bring more of the same.

UBS predicted that the U.S. pay TV industry will lose another 6.2 million video subscribers in 2020, down slightly from the 6.4 million the analyst firm predicts will be lost in total this year. If that loss comes to bear it will represent a 6.7% rate of decline, ahead of 6.2% in 2019 and well ahead of 1.2% in 2018 when video subscriber losses totaled 1.2 million.

This week AT&T, Charter and Comcast all had a chance to expound on the future of pay TV during investor conference interviews. Here’s what they said:

AT&T

At the last minute, AT&T COO John Stankey (who’s also the CEO of WarnerMedia) subbed in for CEO Randall Stephenson at the UBS investor conference, but it’s likely that the messaging didn’t change much. AT&T reiterated that video subscriber losses had topped out after the third quarter. However, the company still has a long descent ahead of it to get its numbers back to acceptable levels.

In October, the company said it lost approximately 1.16 million premium video subscribers (DirecTV and U-verse), and lost another 195,000 AT&T TV subscribers for a total of about 1.358 million during the third quarter. The losses were dramatically higher than the 297,000 total net subscribers lost in the year ago quarter. The good news is that earnings for AT&T’s entertainment group held steady, though Stankey warned that with the introduction of AT&T TV and HBO Max next year (in February and May, respectively) along with the company’s continued fiber expansion, the path to stable EBITDA in 2020 won’t be as “clear cut.”

“You will see subscriber losses have peaked in ‘19 and we will have a much more stable construct that’s going over there, and a combination of a better video product and continuing to make headway on the broadband footprint,” Stankey said, according to a Seeking Alpha transcript.

Charter

Charter CEO Tom Rutledge said that his company’s aggregate decline in video subscribers was 2.3% (which contrasts with aggregate growth of 5.6% for the company broadband business), and he admitted the video business will continue to be pressured.

“There are a couple things driving it. It’s mostly price. The bundle has become really expensive and nothing really has stopped that,” Rutledge said. He also again pointed toward password sharing shoulders some of the blame, pointing out that if people can get the content for free than they will stop paying for it.

UBS analyst John Hodulik said that Charter sees the rate of cord cutting slowing down as single-family homes remain stable and the passing impact of multiple dwelling units, college and second homes on subscriber totals.

“Charter will continue to offer video as long as it enhances the customer relationship. The company now has 4M video subs that are app-based (25%+ of the video base) and don't require any CPE. Mgmt. expects fewer and cheaper STB and its market share growth to continue to drive lower capital intensity,” wrote Hodulik in a research note.

Comcast

Comcast’s video subscriber losses have not been DirecTV-big, but the company has dropped more than 470,000 subs over the past two quarters.

CFO Mike Cavanagh said this week that thanks to the company’s investment in its X1 platform, it’s still well positioned to provide video in a traditional bundle for homes where it makes sense, “but given the rise of streaming and interest in streaming, there are increasingly homes where you can't provide the full experience and expect to make money doing so.”

Cavanagh reiterated Comcast’s views that broadband is the core product and that it will continue looking at ways to add stickiness and make incremental money. That strategy has manifested itself in Comcast’s Flex product, a streaming box and aggregated platform it offers to its broadband-only subscribers. According to a Seeking Alpha transcript, Comcast is going to be pushing Flex hard in 2020.

“It's very early days, so I won't venture any numbers for where we want to be externally next year, but you can imagine we’ve a robust focus on it internally. And I think we will have a good year next year with that product,” Cavanagh said.

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