The landscape of cable television in the United States is facing a seismic shift, and one of the biggest players in the industry, Charter Communications, has delivered a stark message to its partners and investors: the traditional cable-TV model is broken and in dire need of repair or abandonment. In an 11-page presentation to investors, Charter Communications has pointed out the escalating issues that are plaguing the cable TV sector, highlighting the soaring costs for both consumers and providers. The phenomenon of cord-cutters, along with mounting subscription fees, is creating what Charter describes as a “vicious video cycle.”
The Challenge of Carriage Fights
Charter’s presentation comes at a crucial time, coinciding with ongoing negotiations with media giant, the Walt Disney Company. Disney, the owner of popular cable channels like ESPN and FX, has withheld its content from Charter’s nearly 15 million pay-TV subscribers until a mutual agreement on compensation is reached. This has left Charter’s Spectrum TV service customers without access to major events like the U.S. Open tennis tournament and college football games, causing considerable frustration among viewers.
Such disputes, often referred to as “carriage fights,” are not uncommon in the media industry. They typically involve channels going dark on cable systems for days or even weeks while cable providers and content creators negotiate the worth of the channels and how they should be bundled. However, Charter’s assertion that elements of its own business model are in need of repair adds a new layer to the challenges faced by the cable-TV industry.
The Decline of Cable Subscriptions
The cable-TV industry is grappling with declining subscriptions, with over five million Americans cancelling their cable-TV subscriptions annually, as per research by SVB MoffettNathanson. This exodus is compelling traditional media companies to find alternative revenue streams while maintaining their lucrative cable partnerships. Simultaneously, investors are growing impatient with efforts to develop new streaming businesses, claiming they are less profitable than traditional cable TV.
The Rise of Tech Companies and Changing Dynamics
Adding to these challenges is the entry of tech giants like Apple and Amazon, who are willing to invest heavily in acquiring live sports rights. This competition is driving up programming costs and further complicating the landscape for cable companies. To adapt, cable providers have diversified their offerings, incorporating services like wireless internet.
Charter’s presentation, in its quest for a better deal with Disney, goes beyond mere negotiations and delivers a scathing critique of the entire cable television industry, which has been a cash cow for companies like Charter and Disney for decades. Charter highlights that customers are leaving the traditional video ecosystem, leading to escalating losses.