Disney dispute drags on Charter video subs in Q4, nearly 1M Xumo Stream boxes deployed

Charter Communications in the fourth quarter saw an earlier carriage dispute with Disney drag on its traditional video subscriber metrics, while separately the cable operator deployed nearly 1 million Xumo Stream Box devices to Spectrum customers.

Charter reported losing 248,000 net residential video customers in the final three months of 2023, which it said was partly driven by the temporary loss of Disney programming, including ESPN, in September. As of the end of 2023, Charter’s residential video base now stands at 13.5 million, reflecting a decrease of 6.9% or around 1 million customers compared to the end of 2022. The Q4 losses are worse than the 145,000 net video subscribers it lost in the same period a year ago.  

On Charter’s earnings call Friday CFO Jessica Fischer, in response to an analyst question on competitive dynamics, particularly from fixed wireless and fiber, said the customer environment wasn’t consistent in the quarter and early on in period the company had seen some carry over from the Disney dispute and an August rate event. In addition to video subscriber losses, Charter in Q4 lost 62,000 net residential internet subscribers.

“We had expected November and December to recover to the levels that we had seen going into that event and they didn’t,” Fischer said.

Charter lost Disney programming in early September amid a public carriage dispute but reached a new agreement less than two weeks later. The deal included providing the ad-supported version of Disney+ to customers of certain Charter pay TV packages at no extra cost. The cable operator in January started distributing Disney+ with ads to customers of its Spectrum TV Select packages nationwide. In the next several months ESPN+ will join the mix. In addition, last month Charter inked a carriage renewal with TelevisaUnivision that will see the forthcoming premium ad-supported version of the programmer’s Spanish-language ViX streaming service offered to Spectrum TV customers as part of certain TV packages in the coming months.

Part of the aim of Charter’s new deals is to ensure the company and customers don’t need to pay twice for content from linear pay TV packages and that programmers make available in other, often lower-cost, direct-to-consumer offerings. For content providers, Charter offers a large base of potential wholesale streaming customers at lower subscriber acquisition costs, who simultaneously can help build up audiences on newer streaming plans with ads that drive advertising revenue for the likes of Disney. And in Disney’s case, Charter is also putting marketing dollars behind promoting the company’s streaming apps to customers, including broadband-only.

On Friday Charter CEO and President Chris Winfrey reiterated the operator’s intent to pursue similar deals with other programmers.

“This new hybrid distribution model is good for consumers, and we plan to modernize all of our distribution agreements upon renewal,” Winfrey said. “That means packaging flexibility, value, and not asking customers or Charter to pay twice for similar DTC and linear programming.”

As Charter and the pay TV industry at large continues to be challenged by contracting subscriber bases alongside increased carriage and retransmission consent fees, the operator is looking to offer more flexible packages and options that also align with consumer habits and preferences in a shift to streaming.

To that end, in addition to its Spectrum TV app, the Xumo Stream Box device, which was developed under a joint venture with Comcast and debuted this fall, is now its go-to-market platform for new video sales.

Nearly 1 million Xumo Stream Boxes deployed

Charter launched the Xumo Stream Box across its entire footprint in October, and on Friday Winfrey said it had deployed nearly 1 million of the streaming devices. 

The Xumo Stream Box aims to simplify search, discovery and viewing by integrating pay TV and direct-to-consumer streaming apps into one interface, powered by Comcast’s Entertainment OS.

Winfrey cited “great customer feedback” so far and said the cable operator can continue to improve its attach rates.  

Taken together, Winfrey said the new hybrid distribution model and the Xumo Stream Box “provides a clear path to solve key customer issues of choice, value and utility, with seamless linear, DTC and SVOD integration, and advanced search and discovery functionality.”

Charter’s quarterly traditional residential video revenues declined 8.1% year over year in the fourth quarter to $3.9 billion. The operator attributed the decline to a higher mix of lower priced packages within its video base, alongside a decline in video subscribers in 2023, partially offset by promotional price step-ups and rate increases that pass through higher programming costs.

Growth in broadband and mobile revenue helped keep Charter’s total Q4 residential revenue flat at about $10.72 billion. Advertising sales of $428 million were down 23% in Q4. Growth in internet and mobile were largely offset by lower residential video and advertising revenue, contributing to total quarterly revenues of $13.7 billion, up 0.3% year over year.

The cable operator’s fourth quarter programming costs declined by 10.6%, or $296 million, driven by fewer video customers and a higher mix of lower-cost packages. Net income in Q4 totaled $1.1 billion, compared to $1.2 billion in Q4 2022. Quarterly adjusted EBITDA grew 1.6% to $5.57 billion.

Charter’s full year residential video revenues were down 6.4% to $16.35 billion. Total 2023 revenues were up 1.1% to $54.6 billion, with net income declining 9.9% in 2023 to $4.6 billion. Adjusted EBITDA for the full year 2023 grew 1.3% to $21.89 billion.