A plan by Charter Communications to offer its Spectrum TV customers access to streaming services is a gamble that has yet to pay off.
On Friday, the telecommunications firm disclosed it lost 281,000 residential video customers during its third financial quarter (Q3) of the year. The figure was slightly better than the 393,000 customers that canceled their Spectrum TV plan during Q2, but is still an indication that the company’s attempt to reorient its pay TV packages around streaming services is off to a rocky start.
The strategy began last year when Charter was in the middle of a carriage dispute with the Walt Disney Company, the result of a lapsed distribution contract between the two sides. As is typically the case, Disney wanted more money for its channels. Strangely, Charter said it was willing to pay the company whatever it wanted — but it demanded something more in return.
Specifically, Charter said it wanted Disney to throw in access to its streaming services — Disney Plus, Hulu and ESPN Plus — as an added value for its Spectrum TV customers. As Charter put it, Spectrum TV customers shouldn’t have to pay twice for programming offered by Disney, which was siphoning off shows like “Dancing with the Stars” for its own services while charging Spectrum TV customers significant fees for ABC, ESPN and other channels.
Ultimately, the two sides settled the matter, with Charter agreeing to purchase wholesale access to Disney-owned streaming services. Most Spectrum TV subscribers now have complementary access to Hulu and Disney Plus as part of their cable TV package, and those with ESPN channels also get ESPN Plus.
Over time, the company has struck similar agreements with programmers like AMC Networks, Paramount Global, Allen Media Group and others, which now allow Spectrum TV customers to get access to the ad-supported tiers of their streaming services, too.
Charter envisioned the arrangements as a way to provide added value to Spectrum TV customers, who could pay one bill and get dozens of linear TV networks and their respective streaming services at a single price point.
Customers have, apparently, not been very receptive to that offer. Reports indicate few have activated streaming plans that are offered through Spectrum TV, and the company’s residential pay TV customer base now stands at 12.437 million, down nearly 10 percent compared to one year ago when Charter first executed its strategy.
Small business video customers — who do not benefit from the streaming arrangement — were also down for the quarter, with Charter ending Q3 with 578,000 enterprise Spectrum TV subscribers, or 8 percent fewer than last year. Total Spectrum TV customers stood at just over 13 million for Q3, down 9.5 percent.
The company’s broadband Internet business also shed customers during Q3, but appeared to fare better on the revenue side of things. Total residential and small business broadband relationships dipped to 30.257 million, down 1.3 percent compared to Q3 2023, while revenue from Spectrum Internet increased 1.7 percent to $5.872 billion during the quarter.
Charter was also boosted by ongoing traction in its Spectrum Mobile business, which bundles with its Spectrum TV and Spectrum Internet products and operates on Verizon’s 4G LTE and 5G Networks. Mobile lines increased nearly 30 percent to end Q3 with 9.354 million residential and small business wireless lines. Revenue attributed to Spectrum Mobile was $801 million, up 37.6 percent compared to Q3 2023.
Overall revenue climbed to $13.8 billion, representing a year-over increase of 1.8 percent, which the company attributed to revenue growth in its Internet and mobile phone service businesses.
“We executed well during the third quarter, building on our operating strategy and foundational investments,” Chris Winfrey, the CEO of Charter, said in a statement. “Now and in the future, we have the best, fully deployed network uniquely capable of delivering seamless connectivity and entertainment, everywhere we operate. We have pricing and packaging that saves customers money with the best products, and a service capability and investment that has yet to be fully realized as a competitive advantage.”
