According to Charter CEO Tom Rutledge, nothing has changed about the pay-TV model in years, yet consumers are being asked to pay more every year. With more than 30 million residential and commercial customers, Charter is the second-largest cable operator in the United States, though cord-cutting has steadily reduced that subscriber base, and its business strategy has evolved.
A recent report from Leichtman Research Group stated that pay-TV providers lost 4.69 million subscribers in 2021. Charter lost 367,000 subscribers last year, compared to Comcast, which lost a larger chunk of 1.67 million subscribers.
“There’s more damage to come in video,” Rutledge said about pay-TV at Morgan Stanley’s Technology, Media & Telecom Conference on Wednesday. “There’s nothing about the old model that’s really changed. The price keeps going up. If you look at all the rights fees that broadcasters paid in the most recent NFL deal. Baseball players want more. Everybody wants more. So there’s nothing to really constrain the cost of live sports in the linear business, and that’s still the glue that holds it together. So, I see that business continuing to get more and more expensive for consumers.”
For instance, Apple is allegedly considering the option of bundling all of the NFL’s outstanding broadcast rights into one multi-billion dollar deal. The “Sunday Ticket” rights alone are expected to reach over $2 billion, so the price for all three NFL assets would be significant.
Charter’s main competitor, Comcast, has secured the rights to Monday and Wednesday night MLB games as of this week and plans on streaming them on Peacock.
Earlier this week, Chairman, CEO & President at Comcast Corporation, Brian L. Roberts, spoke at Morgan Stanley as well. “I think, with time, we’re able to convince large enterprises that it’s okay to switch, to have redundancy. It’s become a corporate imperative that your broadband work. And so we’re in a great position to grow. We’re working well with the other cable operators, like Charter, to go to institutions such as Morgan Stanley and say, ‘Here we are, nationwide.’”
While Comcast is moving with the times, Charter seems to want to hold on to the past. Rutledge added, “So I mean, if you really think about what the video business was a few years ago, it was the perfect distribution model. It’s hard to imagine it ever getting back to being that good. Everybody having 100 million homes and both license fees and advertising. Advertising will shrink in the direct-to-consumer model. Distribution will shrink.”
In the direct-to-consumer model being pursued by media companies like Disney, WarnerMedia, NBCUniversal, Paramount, and others race to catch up with Netflix, the economics are different.
Compared to Roku’s 7,000+ apps, Charter could do more to help customers navigate a world of thousands of streaming apps. Rutledge said that curation “is an opportunity for us.” However, he said the company is “more of a pass-through” than the prime mover in the streaming age. “The opportunity moving forward for somebody who can manage to pull it off is to start to reaggregate and to use that aggregation to give a better, more cost-efficient experience to more people. We think about that every day and how that might happen.”
Despite the massive changes occurring, Rutledge said he did not expect a full-scale reordering of the TV and video industry in the next couple of years. “The current model is still very much in force… I don’t see that disappearing in the next couple of years,” he said.