Charter and Dish Network CEOs both see the long-term decline of pay TV, but take opposite approaches to coping with it. One is doubling down on the big value bundle, the other standing by the skinny approach.
Charter doubles down on the big bundle
Charter CEO, Tom Rutledge, does not think very much of the virtual MVPD approach. He says the claim that vMVPDs will grow the market is false:
“The story from the programmers and some of the virtual MVPD operators was that this was going to grow the market. If you take a look at the evidence so far, the current [vMVPD] offerings just seem to be cannibalizing the same satellite providers’ own base. It’s just a shift.”
Mr. Rutledge also says he sees no reason for Charter to launch its own vMVPD service because “we haven’t seen an opportunity to create new customer relationships out of that that have a high value to us.”
Estimates suggest that DirecTV Now, for example, is currently being offered at or below cost.
Rather than launching a cut-price online service, Charter is doubling down on the big bundle. The company is partnering with AMC networks to create “distinct, high-quality original programming” exclusively for its customers. Mr. Rutledge characterized the deal as “an experiment to see if we can create some high-value product for our customers.” He hopes it will help keep subscribers from trying other competitors.
Charter certainly needs to do something about subscriber losses. The company lost 2% of its video subscribers over the last year and 100,000 in Q1 2017. It now has 16.74 million.
Dish accepts sub losses, embraces change
Mr. Rutledge could be right about vMVPDs cannibalizing satellite providers. In Q1 Dish Network lost 143,000 subscribers, up from a loss of 23,000 in Q1 2016. At least some of these subscribers may be replacing higher priced Dish subscriptions with lower cost Sling TV. Though Dish doesn’t break out the number of Sling TV subscribers, estimates put the number at around 1.9M, up from 700,000 this time last year.
“We think that we’re well-positioned there. We think we’re disciplined. We think that despite the fact that analysts and headlines are about sub loss or sub gain or this ARPU or that ARPU or this quarter or that quarter, we think we’re … one of the few companies that can take a long-term view of it and say we’re not afraid to change.”
Dish and Charter opposites in dealing with pay TV decline
That attitude to change is the essence of the difference between Charter and Dish Network. Mr. Rutledge says he sees “a general decline in the [pay TV] marketplace that is mostly price-driven.” He doesn’t think the trend will change anytime soon, but also doesn’t think it will accelerate. Therefore, he sees no need to launch an online service which will deliver little or no incremental revenue in the near term.
Mr. Ergen sees the same trends, but also sees an opportunity to take advantage of the change, and maybe even drive it:
“We see the change happening and how do we take advantage of the change in a way that perhaps our competitors aren’t doing or are slow to react or want to hold onto what they have but aren’t really going to where the future is.”
Which approach is best? Only time will tell.
Why it matters
Charter and Dish are both losing substantial numbers of video subscribers.
The companies are taking very different approaches to dealing with the problem.
Charter is hoping exclusive content will slow its decline.
Dish is trying to recapture the cord-cutters with the cheaper, lower margin Sling TV.