Two-thirds of Charter video sales are set-top box-less: CEO

Charter Communications’ Xumo joint venture with Comcast is preparing to launch a streaming video product later this. And speaking at an investor conference Thursday, Charter CEO Chris Winfrey said the cable operator is already skilled at streaming, noting the majority of its existing video sales don’t utilize a set-top box but instead its Spectrum app.

“Today, two-thirds of the video sales we have are in a box-less environment, so they’re streaming,” Winfrey said during the MoffettNathanson TMT conference. He claimed that the Spectrum TV is the “most widely distributed television, app, most widely used every single month” and if considered a virtual MVPD would be the largest based on monthly users.  

“We’re very adept in the space of streaming video,” Winfrey said in discussing the upcoming Xumo launch, slated towards the later half of the year.

Charter has a residential cable video base of around 14.2 million, having lost 237,000 net residential subscribers in Q1 2023. He said opportunity for Xumo is to let people pair whatever live TV subscription, be it cable or virtual MVPD they want, together with SVOD and AVOD direct-to-consumer apps in a single location with a unified search and discovery experience through the X1 remote, and content across multiple apps and platforms.

“It’s what every customer’s been looking for, it’s what they want. In some sense that reaggregation of content and making it easy to find, search and discover is how cable was originally put together,” he said. “We just don’t need to own it.”

Winfrey explained how Charter can provide the Xumo platform for consumers and “they can take our video or they can not take our video, and Xumo can have a profitable platform.”

The chief executive believes it’s great for programmers as well as consumers, and as a 50% owner of Xumo with the desire for a high-quality platform that aligns with connectivity products such as broadband and wireless, he thinks it will be good for Charter as well.

Programmers 'killed their own golden goose'

Charter’s involvement in a streaming video platform launch (although to be clear Xumo operates as an independent business) comes, as mentioned, as the company continues to see its traditional cable pay TV base decline. During the investor conference Winfrey laid into programmers for their role in a shrinking pay TV industry (which collectively lost 2.3 million in Q1, per Moffett estimates), suggesting that in the shift to streaming not many companies have done a good job of protecting the value of their content assets.

“Programmers did their work well. They managed to kill their own golden goose,” Winfrey said.

He went on to describe the lead up to continued cord cutting trends, saying how programmers continued to take higher rates for decades, bundled it together with additional content that not all customers wanted and “shoving it down their throat to have it cost more money” as related cable fees rose. He said they then took the route of making that same content available in a la carte environments that are cheaper than cable, or even free via AVOD or historically through password sharing.

“It’s very difficult to sell that same content at a premium when it’s available for free,” he said.

Still, as analysts at the MoffettNathanson event noted, Charter’s been able to lose subscribers at a slower rate than its peers, in part offering skinny video bundles (for example, compared to Charter’s  Q1 losses, Comcast shed 614,000 pay TV subs). Winfrey agreed its pay TV decline has been slower but emphasized the company is still losing video, despite seeing value in the product.

“The company that perhaps believes in the power of high-quality video product more than most any other distributor is still losing video,” Winfrey conceded. He attributed the better performance to Charter’s ability to manage flexibility in packages it offers – but acknowledged that “only goes so far.” In Q1 earnings, Charter attributed video losses in part to increases in programming expenses that were passed through to consumers via rate increases in January.

His personal view is if all distributors had the ability to manage video packages with flexibility, in a way that made the options desirable and affordable, it would be good for programmers, consumers and for Charter itself. However, the likelihood of that occurring is “very low,” according to the chief executive, who said the media and programming market has “become beholden to the short-term whims of capital markets and it has pandered to them.”

Winfrey pointed to early days of media companies selling into SVODs, saying they didn’t realize at the time they were essentially selling their content into an unprotected space without branding or advertising. Then the market shifted, and sentiment around that approach changed, with Winfrey categorizing a “whipsaw” currently taking place in the DTC space.

“I think you have to have a long-term vision and you have to protect the value of the asset, and not many people have really done a good job of that,” he said. “That’s why everybody’s losing traditional video subscribers…and ultimately there’s going to be a lot less revenue in the space.”

As for how the current environment and diluted value is playing into programming and carriage negotiations, Winfrey said the reality of the situation is there “but the flexibility that we need isn’t happening anywhere fast enough,” adding that it’s a multifaceted “painful process to go through at this point.”