Charter CEO: HBO, CBS Web Services Provide Opportunity for Pay TV Companies

Charter CEO Tom Rutledge - H 2014
AP Photo/Richard Drew

Charter CEO Tom Rutledge - H 2014

Arguing that "cord-cutting is really financially driven," Tom Rutledge says pay TV giants could have "a more successful video product"

Charter Communications CEO Tom Rutledge said Friday that new online-only services from CBS and HBO could actually be good news for pay TV operators.

"There are a lot of discussions about direct-to-consumer relationships … and they have interesting implications" for business models, he said on the cable company's quarterly earnings conference call. Some of them are favorable for pay TV firms, he suggested.

"To the extent that programmers voluntarily break up the very fat basic bundle that they have put together contractually would be an opportunity for us to actually build a more compelling product," Rutledge argued.

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After all, rising costs are "the biggest strain" on the pay TV business, the CEO of Charter, in which John Malone's Liberty Media owns a big stake, said. "Cord-cutting is really financially driven more than it is content driven," he said, highlighting that consumers' incomes have not kept up with cost increases of pay TV.

Basic pay TV service bundles could be "better put together for specific segments of the population," Rutledge said. "If we had that ability, and programmers were willing to allow us to have that ability, I think we could actually have a better, more successful video product."

He described the networks' new offers as possibly giving pay TV companies an "opportunity to potentially put more specific customer-oriented packages together, or packages that meet customer needs," saying that would be "an attractive thing."

NBCUniversal CEO Steve Burke last week argued that both HBO and CBS are "trying to add to their existing ecosystem" rather than going "over-the-top" to avoid cannibalizing their high-margin existing pay TV business. "They have to be very careful with cannibalization," he said. After all, HBO created the premium TV business, and "CBS is not, I don't think, trying to get their existing ecosystem to move over." He said the companies are, however, trying to reach millennials, adding "that's what we all are trying to do." He concluded: "I don’t think distributing directly to consumers via the Internet is an easy thing to do.”

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Rutledge also said Charter's future growth doesn't rely on more acquisitions beyond one agreed with Comcast that depends on the latter's successful completion of its takeover of Time Warner Cable. But he said the company would continue looking for deal opportunities. 

Twitter: @georgszalai