Spectrum-Disney Deal “Absolutely” Created Blueprint For Future Carriage Deals, Charter CFO Says; Q4 Broadband Subscriber Loss Warning Hits Stock


Nearly three months after Charter Communications and Disney struck a landmark distribution deal, Charter CFO Jessica Fischer said it “absolutely” has created a template for future agreements.

“We’re not willing to make our customers pay twice for content,” the exec said during an appearance at the UBS Media and Communications Conference in New York. “What that means is, if there is a programmer who is making their programming available in a direct-to-consumer streaming service and our customers are paying for that content in the linear service, our expectation is that that DTC service would be part of our bundle.”

The Disney deal, which was reached September 11 after a 10-day outage affecting ESPN, ABC and other major Disney networks, followed some concessions from Charter as to the promotion of Disney streaming services into Spectrum offerings. But long-established linear networks like Freeform, FXX and others were left out of the agreement, losing carriage on the No. 2 cable system in the U.S. The ultimate outcome was a “skinnier bundle,” Fischer said, which is good news for consumers.

While there positive takeaways on the video front during the session, Fischer offered a less ebullient outlook for Charter’s broadband business in the current quarter.

“It’s likely that we could end up with negative net adds at the end of Q4,” Fischer said. She cited a range of factors, from residue from the Disney deal to macroeconomic pressures to a stagnant housing market. Despite the near-term pressure, Fischer emphasized, “How we see broadband in the longer term hasn’t changed.” In addition, she continued, “We’re not out of line with the rest of the industry.”

Charter shares dropped 9% in the wake of the CFO’s comments and the stocks of other broadband providers like Comcast and Altice USA also took a hit. Execs from those companies have also given downbeat forecasts for the quarter in terms of broadband, which has long buoyed stocks of companies transitioning from pay-TV to internet service.

“We think that we’ll get those customers back,” Fischer said. “Long term, broadband can continue to grow well.”

Back on video, Fischer was asked about the implications of the Disney carriage deal in a marketplace where cord-cutting has been driven by steadily increasing prices. If more deals include the price of streaming services in the main bill, reducing the obligation for consumers to pay separately for a range of services, cord-cutting will likely ease, Fischer said.

“Should there be more price pressure on programmers overall? Yes,” she said. “We’ve talked a lot over the long term about the fact that programmer rate increases continue to challenge the video space overall. It’s a vicious cycle. … I do think by pushing value back into the bundle by including DTC services, you do create value there, which helps you from a consumer perception standpoint by creating a skinnier bundle where customers pick the content at the price they’re capable of paying.”

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