Charter Communications saw 393,000 customers of its Spectrum TV service cut the cord during the second financial (Q2) of 2024, the company revealed on Friday.
The figure was more than double the 189,000 customers that ditched Spectrum TV during the same time period last year, and strongly suggests that the trend of customers ditching traditional pay TV packages for streaming options is far from over.
It also indicates Charter’s attempt to sweeten the deal of its Spectrum TV products by negotiating rights of access to the streaming services of broadcasters as part of their carriage agreements for TV networks may not be working to address churn at Spectrum TV as it hoped.
Last year, Charter broke new ground in the pay TV space when it resolved a distribution dispute with the Walt Disney Company by successfully negotiating a new carriage agreement that allowed Spectrum TV customers to access ABC, ESPN, the Disney Channel and FX while also having access to the ad-supported tiers of Disney’s streaming services Hulu, Disney Plus and ESPN Plus as part of their service.
The deal also gave Charter greater flexibility to move channels among different Spectrum TV packages, or drop them altogether where it made sense to do so. The company pulled some Disney-owned cable networks like Freeform and FXM (FX Movies), while relegating others to different plans.
Similar agreements have been forged with other broadcasters, including Allen Media’s The Weather Channel and Televisa-Univision, which brought access to their direct-to-consumer streaming services to Spectrum TV’s packages.
If the approach was meant to keep customers locked in to Spectrum TV by sweetening their plans with complementary streaming access, it doesn’t seem to be a success.
Total residential video subscribers clocked in at 12.718 million during Q2, or nearly 10 percent lower than the 14.071 million who paid for Spectrum TV during Q2 2023. Small business video accounts dropped to 591,000, down 7 percent.
Overall customer relationships — which include Spectrum TV, Spectrum Internet, Spectrum Mobile and other products — were 29.615 million by the end of June, down 1.3 percent on a year-over basis.
The woes of Charter’s traditional TV business could have been a boon for Spectrum Internet, since streaming video products require broadband Internet to function, but the end of a government subsidy called the Affordable Connectivity Program (ACP) dinged Charter on the broadband side, too.
Charter said the number of residential customers paying for Spectrum Internet dropped by 154,000 during Q2, brought on by the end of the ACP subsidy, which discounted the rate of broadband service plans by $30.
Charter tried to address the winding down of the ACP by launching a new low-cost product called Spectrum Internet Assist, which offered residential customers high-speed Internet for $25 per month. The download speed promised through Spectrum Internet Assist is 50 megabits-per-second (Mbps), lower than the 100 Mbps that federal regulators require in order for high-speed Internet service to be considered “broadband Internet.”
It isn’t clear how many customers switched to Spectrum Internet Assist. Charter requires customers to prove they are receiving federal or state assistance in order to take advantage of the plan.
On a conference call with investors on Friday, Charter CEO Chris Winfrey suggested the impact from the end of the ACP may bleed into the third quarter (Q3) of the year, indicating that the company may see further losses in its broadband segment.
“We’re very focused on really isolating the ACP impact internally and evaluating our performance and retaining those customers, because we want to keep them connected,” Winfrey noted, without offering more specifics.
Revenue from Spectrum Internet was one of two business segments that posted a year-over increase, with the company collecting $5.806 billion from its home and small business Internet customers, up 1.3 percent compared to Q2 2023. Spectrum Mobile, the prepaid wireless service offered to eligible Spectrum TV and Spectrum Internet customers, earned $737 million during Q2, up nearly 37 percent.
Total company revenue clocked in at $13.665 billion during Q2, relatively flat when compared to the same time period last year.
