Charter CEO: Entertainment Giants Need "Dual Content Strategy" Amid Rise of Streaming Services

Charter CEO Tom Rutledge
Bryan Bedder/Getty Images

Charter CEO Tom Rutledge

Tom Rutledge told the UBS Global TMT Virtual Conference that broadband user growth was "unusual" this year due to the coronavirus pandemic, predicting a return to normalized trends in 2021.

Cable operator Charter Communications, in which John Malone's Liberty Broadband owns a big stake, expects to continue selling video services successfully despite high programming costs. But over time Hollywood giants' growing focus on direct-to-consumer services could make paying for content bundles untenable, chairman and CEO Tom Rutledge suggested during a virtual investor conference on Monday.

The question will be "do you put us in a position where we would be willing to drop your bundle package because a consumer could get those products directly, [and] there is no need for us to pay for that as part of the bundle," he told the UBS Global TMT Virtual Conference. "Or do you have a dual content strategy where you got good content in your linear products, but different content in your direct-to-consumer products? It is yet to be determined whether the owners of content will try to support both worlds."

Asked about virtual pay TV services, Rutledge said they are "me-too products," and most have raised prices because of "cost structures imposed by content companies." Concluded the Charter CEO: "I don’t know that that is a very easy business to be successful in."

Suggesting that the traditional pay TV bundle would continue to be around for a while, he said: "My sense is that the bundle continues to be sold for some significant period of time until it finally breaks," and Charter has advantages in selling it giving its experience and customer relationships.

Asked about surprise recent pay TV subscriber growth recorded by Charter, Rutledge said that was a "complicated story," partly driven by strong broadband growth amid former satellite TV customers and "lower-priced" skinnier video offers. "People want it," but there are "price pressures," meaning video is "not the main driver of our business anymore."

The Charter boss added the firm's success in selling streaming apps, saying: "We have more than 10 million app-based users who buy a video from us in true apps," which leverages the company's customer relationships. Malone has lauded the likes of Roku and Amazon as aggregators of digital content services.

Rutledge also predicted that after a strong 2020 for broadband user growth, next year would be closer to 2019 trends, with the firm likely to "revert gradually to normal, ... [a] new normal" given that 2020 has been "unusual" due to the coronavirus pandemic.

This fall, Rutledge had said that the company sees its pay TV future in the role of a "video store," explaining: "We look at our future in video more as a video store," offering "a whole range" of products and services, such as tiers of sports channels, other linear TV services, advertising VOD services and others that are part of an "overall connectivity experience." He concluded: "That's the fundamental aspect of video that we are interested in."