Charter Loses 90,000 Pay TV Subs, CEO Talks Content Consolidation

Tom Rutledge - backstage at The New York Times DealBook - Getty-H 2017
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"There are some smaller companies there that have questionable pricing power, and you can see them looking to align themselves to get it," says chairman and CEO Tom Rutledge.

Cable operator Charter Communications, in which John Malone's Liberty owns a big stake, on Thursday reported lower second-quarter earnings and continued pay TV subscriber losses.

Chairman and CEO Tom Rutledge on an earnings call was asked about recent chatter about various possible deals that could consolidate content companies. "Obviously, depending on how significant it was, it could have an impact on pricing power of entities, and I think there are some smaller companies there that have questionable pricing power, and you can see them looking to align themselves to get it," he said. "So, I think you'll see some, but it's hard for me to quantify it."

Discovery Communications has been in talks with Scripps Networks Interactive about a combination, while Viacom had also looked at Scripps. Univision Communications has reportedly also been fielding deal proposals, including from John Malone, who was looking to buy a stake and whose universe of entertainment assets includes Lionsgate and Discovery.

Charter lost 90,000 net residential pay TV subscribers in the second quarter, compared with a loss of 152,000 in the year-ago period, or 100,000 on a pro forma basis. For the first quarter of the year, the company had recorded a 100,000 drop. 

Macquarie Capital analyst Amy Yong had predicted a 125,000 drop "as a result of tough comps from heavy [Comcast] Xfinity promos, Charter's customer pruning and increased competition from AT&T/DirecTV and Fios."

The $55 billion acquisition of Time Warner Cable and the $10.4 billion purchase of Bright House in May of last year made Charter the second-biggest U.S. cable company behind Comcast, and it has focused on higher-end subscribers, which has meant a loss of lower-end Time Warner Cable customers.

Charter on Tuesday reported a profit of $139 million, compared with a year-ago pro forma profit of $248 million. Revenue rose 4 percent to $10.4 billion.

Said Rutledge: "With the rollout of our new pricing and packaging completed in June, we are now offering a simple, high-value product across our 50 million passings, under one brand, Spectrum. That product is working in the marketplace, and we continue to see higher year-over-year customer connect volumes across our new footprint."

He added: "As we move forward with our integration, more of our customers are getting better products at better prices, which will drive higher customer satisfaction, lower churn and greater value into our business."