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Charter Communications on Cord-Cutting No Big Deal

Cut the Cord

Cord cutting has been a nightmare for cable service providers across the States!

The constant reduction in Cable TV subscribers has been haunting the investors and the companies alike. However, Charter Communications thinks that cord cutting is not a big deal for the company. According to the statistics, Charter Spectrum is the second largest cable provider in the States. The company offers a variety of services including Cable TV, Internet, and Phone that can be bundled using Charter packages. Although the company offers its services in around 43 states, it has recently put the investors in a worrisome situation as the Cable TV subscribers continue to decline. However, the company is not in this alone, joining the league are companies like Comcast.

According to Statista, the number of cord-cutters is expected to reach over 19 Million by the year 2019.

For all of you wondering, let me first introduce you to the concept of “cut the cord“.

What is cord cutting?

Cord cutting refers to forgoing a television or landline phone subscription in favor of an alternate wireless or internet based service. It has been on the rise since the past decade as broadband services have been on the rise. And with every passing year, more and more people are canceling their Cable TV subscriptions because they have better and cheaper internet alternatives. This change in dynamics has caused prominent cable service providers to rethink their strategies.

Who is to blame?

If given an option, who would you rather pick? Cable TV or Netflix?

There, you just answered the ‘who is to blame ‘question by voting for Netflix. But Netflix alone is not the culprit. Joining it are names like Amazon TV and Hulu. These sites offer the subscribers a buffet of shows and movies to choose from. And they are not heavy on the pocket either. Which brings in light another culprit. The high cost! Yes, some analysts argue that it is not the availability of online streaming websites, but the costly subscriptions that have escalated cord cutting. According to statistics, the subscription cost of premium Cable TV packages has increased by 74% since 2000. This means that now a subscriber has to pay $100 as opposed to $60 back in 2000. This is worrying for the subscribers because the median wages of the workers have not increased at the same rate as the subscription prices have.

Why isn’t Charter Communication worried?

While the whole situation is alarming, they seem anything but worried. The company has explained to the investors through statistics that it will not suffer as a result of an increase in cord-cutters. Although the company fell on hard times recently, it continues to display an optimistic attitude.

Here’s why.

It is an undeniable fact that the company lost video subscribers in the first quarter of 2018. However, there was a 5.3% increase in video revenue due to an increase in prices. Talking of high prices, the CFO hinted at the company raising the broadband prices in the near future for customers who do not subscribe to the video bundle. That’s a pretty smart move on the company’s part to stop people from withdrawing the video services. So, if you think cutting the cord will save you some bucks, you’re in for a surprise.

Moreover, the company has recently licensed Verizon network to provide mobile phone services. This collaboration would mean that Charter could offset the video subscriber losses. Even if they continue to lose video subscribers, the core product that it offers is broadband. And that is an indispensable service. This means that they are less likely to lose profitability as a decrease in video service subscribers would be covered up by an increase in broadband service subscribers. In fact, according to data, Charter lost 73k video subscribers while gaining 223k broadband subscribers. However, they continue to offer Spectrum Triple Play because there still exist cable loyalists who continue to cling to the remote.

The Verdict?

Household formation is increasing in the States. This means that people are still more likely to opt for Cable TV bundle, as it seems like a decent deal if you want to sit at home and watch TV. Moreover, Charter’s recent collaboration with Verizon that enabled it to offer wireless phone service, could help the new product to grow provided it is available in friendly bundles/offers.

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