Media analyst sees benefit to Charter staying out of streaming space

(Logo: Charter Communications, Graphic: The Desk)

As traditional television companies shift business strategies to include more-diverse online content offerings, at least one media analyst sees value in a cable company’s apparent decision to steer clear of entering the crowded streaming space.

In an interview with Barron’s this week, media analyst Craig Moffett said Charter Communications was his “favorite name in the pay-TV universe” compared to rival companies like Comcast, AT&T and Verizon, according to reporter Alex Eule.

Moffett’s infatuation with Charter — which sells cable television, broadband Internet and home phone service under the Spectrum brand name — appeared to stem from its decision to remain committed to those traditional service offerings. The company also offers a handful of pay television networks rooted in sports and local news, but those are only available to subscribers of its cable TV or Internet services.

By comparison, Comcast, AT&T and Verizon have over the years have branched out into areas beyond its traditional communication services. More than a decade ago, Comcast acquired NBC Universal from General Electric; this week, the company plans to launch Peacock, a streaming TV service.

Likewise, AT&T acquired Time Warner in 2018 as it sought to enter the content marketplace. It recently launched HBO Max, a streaming television service that incorporates original programming and licensed movies from HBO alongside content from AT&T WarnerMedia’s other brands, including Warner Bros. Studios, CNN and Cartoon Network.

Verizon has aggressively purchased web publishers over the last decade. The gamble was that web publishers like the Huffington Post, AOL, Yahoo, Engadget, Flickr, TechCrunch and Tumblr would help boost Verizon’s profit line. It didn’t — Verizon took a multi-billion dollar write-down for its purchases of AOL and Yahoo; it sold Flickr to SmugMug that same year and offloaded Tumblr onto WordPress last year.

Charter, on the other hand, has stuck with offering cable and Internet services. What might appear to be a stubborn strategy in the age of new media has apparently worked out okay for the company: Its stock price is up 11 percent compared to last year, commanding more than $530 a share, and that momentum shows no sign of slowing down.

Last week, financial analyst Gregor McNiff with the firm Nomura Instinet upgraded Charter to a “buy.” McNiff cited Charter’s “accelerated broadband-only momentum,” particularly in the era of remote working due to the COVID-19 health pandemic. McNiff also saw Charter’s commitment to improving broadband connectivity in rural areas as an attractive focus for the cable company.

Analysts in the past have said the emergence of 5G wireless technology might eat into the wireline broadband Internet industry’s share of the market, but McNiff said those concerns might be overstated given the slow rollout of 5G in the United States and uncertainty over whether its viability and stability.

Charter may also be buoyed by the rising cost of streaming cable TV alternatives. Once seen as a cheaper way to access entertainment, news and sports, nearly all of the big-name streaming cable TV alternatives have raised their base subscription prices over the last five years, with the latest fee increases hitting YouTube TV and Fubo TV customers.

Dollar for dollar, streaming cable TV alternatives are still a better value than most cable TV services. But budget-hungry consumers who simply want to watch TV and don’t mind doing without extra features might be drawn back to cable TV bundles that, at first glance, appear cheaper than streaming alternatives.

The two analysts cited by Barron’s last week think Charter is a winner no matter what happens in the pay TV landscape — whether customers use streaming services or not, there’s a huge demand for broadband Internet, and that’s what Charter provides.

(Disclosure: At press time, the author of this story owned stock in AT&T.)