Charter Loses 257K Video Subs in Q4, “Partly Driven” by Disney Dispute, but Now Tops Comcast

Cable giant Charter Communications, in which John Malone’s Liberty Broadband owns a major stake, on Friday reported its fourth-quarter and full-year 2023 results, including latest subscriber trends.

The company, led by CEO Chris Winfrey, revealed that it lost 257,000 pay TV subscribers in its latest quarter, “partly driven by video disconnects related to the temporary loss of Disney programming in early September,” compared with a loss of 144,000 in the year-ago period. The latest figure was made up of 248,000 lost residential customers and 9,000 lost small- and medium-sized business accounts.

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During the third quarter of 2023, it had lost 327,000 video customers, driven by the impact of the company’s high-profile carriage dispute with The Walt Disney Co. After a showdown lasting a couple of weeks, the companies struck a new deal that included such terms as Disney+ being bundled into Charter’s core video offering, as well as the removal of a number of Disney cable channels, including Freeform, Disney Junior and Disney XD.

Charter ended 2023 with more than 14.1 million total pay-TV customers. Its 14,122,000 video users now make it the largest U.S. pay TV operator, as Comcast lost 389,000 in the fourth quarter, taking it to 14,106,000. As of the end of the third quarter in September, Comcast had been ahead with 14,495,000, compared with Charter’s 14,379,000.

Charter and Comcast rolled out their Xumo streaming platform in October, which they are planning to use as a new focal point for video content. “In October, Charter began deploying Xumo Stream Boxes to video customers,” the company said in its earnings press release Friday. “The Xumo Stream Box combines a live TV experience with access to hundreds of the most popular direct-to-consumer TV applications and features unified search and discovery along with a curated content offering based on the customer’s interests and subscriptions.” The company later said that it was approaching the deployment of 1 million Xumo boxes.

Charter’s and its cable peers’ broadband user momentum has been in Wall Street’s focus amid continuing signs that its growth has come to a halt. In its fourth quarter, Charter recorded a bigger-than-expected loss of 61,000 customers after adding 105,000 in the year-ago period. The company ended 2023 with nearly 30.6 million broadband subscribers.

Mobile remained a growth business for Charter. It recorded 546,000 net additions in total mobile lines in the fourth quarter, compared with 615,000 in the year-ago period.

Said Winfrey: “We are executing on a clear strategy to ensure we offer consumers the best products and services, all while saving them money.”

On the earnings conference call, Winfrey highlighted that Charter gained 155,000 broadband subscribers over the course of 2023 and said his team expects to return to “more normalized growth” after near-term challenges. “Internet growth in our existing footprint has been challenging, driven by admittedly more persistent competition for fixed wireless and similar levels of wireline overbuild activity,” he said. “Small changes in gross additions and churn in a low-transaction environment have driven outsized impact to net gains, which was clearly the case as we moved through the last quarter.”

Fixed wireless broadband services usually are deployed in areas with no fiber internet infrastructure, mainly rural areas. “Overbuilders” are companies that enter areas already served by existing telecom providers.

Winfrey though believes that “the impact of fixed wireless is temporary,” explaining: “Our internet product is faster and more reliable. Our pricing is lower when similarly bundled with mobile. Customer bandwidth needs continue to increase.” And competitors will face capacity challenges and “will be required to allocate their spectrum and capital to maintain profitable mobile services.”

And he argued: “We don’t see overbuilders reaching their penetration and return on investment goals within our footprint now or in the future.”

As such, Charter is “focused on key strategic initiatives that enhance our long-term competitiveness and growth capabilities,” such as bringing broadband services to rural markets, Winfrey said. While the timing of a return to “more normalized” broadband user trends remains open, the CEO said: “We’re keeping our heads down and executing on a clear strategy to ensure we can offer customers the best products and services across our entire footprint, all while saving customers money, not only now but in the future.”

Discussing video services, Charter CFO Jessica Fischer said on the call that “service transaction trends are back on trajectory after the programming dispute in September.”

And her CEO touted benefits ahead from Xumo and the new Disney carriage agreement. “This new hybrid distribution model is good for consumers,” he said about the latter. “And we plan to modernize all of our distribution agreements upon renewal. That means packaging flexibility, value, and not asking customers or Charter to pay twice for similar direct-to-consumer (DTC) and linear programming.”

Concluded Winfrey: “Our new hybrid distribution model combined with Xumo’s content-forward interface provides a clear path to solve key customer issues of choice, value and utility with seamless linear, DTC and SVOD integration, and advanced search and discovery functionality. When we reflect on our key initiatives and what we believe are the short-term market challenges, we’re acting as long-term Charter shareholders to maximize value.”

Charter’s stock was down more than 10 percent in early Friday trading. As of 10:30 a.m. ET, company shares we 13 percent lower at $332.81.

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