It’s still early in the metaphorical tide cycle, but Charter Communications’ strategy of bundling ad-supported versions of premium subscription streaming services within its pay TV packages seems to be lifting all boats.
We’ll start with Charter itself, which more than halved its cord-cutting in the first quarter, stemming customer losses to just 181,000 versus 405,000 in the first three months of 2024. With the cable giant’s rate of customer attrition also slowing in Q4, equity analyst Craig Moffett remarked, “It appears that we are beginning to see early impacts of Charter’s bundled streaming packages."
Starting with its landmark distribution standoff with Disney in September 2023, when Charter negotiated the media company into letting it bundle ad-discounted versions of Disney+ and ESPN+ with its base pay TV packages, providing these streaming services to customers at no additional cost, the cable giant has been deploying one premium U.S. SVOD after another.
And with 12.7 million remaining linear pay TV subscribers, the No. 1 U.S. pay TV operator is also impacting subscribers for its SVOD constituents.
Peacock, which had its ad-supported subscription tier added to Charter’s Spectrum TV Select Plus and TV Select Signature tiers in March, reported a solid Q1 subscriber bump of 5 million paid customers. In parent company Comcast’s first-quarter earnings call, CFO Jason Armstrong specifically credited “Charter entitlements” for the surge.
Meanwhile, Charter announced official integration of Max and Discovery in December, after inking an early renewal - debuts that coincided with a big Q3 and Q4 direct-to-consumer signup period for Warner Bros. Discovery.
Paramount+ was added to Spectrum TV tiers late last summer, leading into a six-month period that culminated in 5.6 million Q4 additions for the SVOD.
And then there’s the seminal Disney. With Disney+ Basic and ESPN+ integration into Spectrum TV announced in early January of last year, domestic Disney+ subscribers grew by a whopping 8 million in the first quarter of 2024 (a metric somewhat offset by losses in international territories).
In its earnings presentation, Disney introduced a new term, saying “Charter entitlements” drove growth in the U.S.
With Vix and AMC+ already added, and integration plans for other niche SVODs on the way, Charter will debut a “digital storefront” later this year to allow customers to sign up for and authenticate all their streaming services in one place.
Certainly, some of the free-to-consumer signups are undoubtedly cannibalizing existing subscriber relationships. But the overall float of Charter’s bundling strategy seems to be, by and large, accretive.
Notably, churn for U.S. subscription streaming services, which had approached 6% at the beginning of 2024, according to research company Antenna, seemed to stabilize last year and dip below 5% in the fourth quarter. It’s not unreasonable to assume that having a population of 12.7 million users, who have little incentive to drop services that cost them nothing beyond their regular cable TV bill, had something to do with that.
For its part, Charter is leaning into the SVOD bundling strategy, believing in the reinvigorated customer value of its new pay TV bundle. After years of marketing neglect, Charter’s linear video products are now promoted as flagship bundled offerings alongside broadband and wireless.
And copycat strategies, the truest form of business flattery, have already begun to emerge, with DirecTV bundling Max with its new MyEntertainment Genre Pack.
Will this new strategy save the pay TV business? Again, it’s early, but the first signs are encouraging.