When Joshua May learned recently that his TV bill would increase by about $40 a month, he called Charter Communications Inc., expecting his cable company to negotiate a better price.
His previous provider, Time Warner Cable, had extended a cheap promotional rate several times so May wouldn’t cancel. But that was before Charter took over the company. When he called this time, the rep wouldn’t budge on the 29% jump for his bundled TV, internet and phone service. So May cut the cord.
“I expected they’d at least offer free HBO or Showtime,” said May, 34, who lives in Springfield, Ohio, and processes loans for a financial institution. “They did nothing.”
May’s experience reflects a growing trend, as pay-TV companies pull back discounts they’ve used for years to retain video subscribers. With internet service growing faster and more profitable, subscribers like May are becoming expendable.
“I’m sort of indifferent,” Charter Chief Executive Officer Tom Rutledge said at an investor conference last month. Two years ago, he said the second-largest U.S. cable company planned to add video customers. Now, they’re not even “a material driver” of Charter’s business, he said.
Over the past few years, pay-TV stocks have suffered wicked swings as investors reacted to growing subscriber losses. But they’ve recovered as the companies shift their focus to lucrative broadband services. Comcast Corp., the largest U.S. cable provider, is up 22% this year and Charter is up 36% to a 21-month high, outpacing the 12% gain for the S&P 500. That’s despite accelerating pay-TV subscriber losses at both companies last quarter.
‘It’s Been Fun’
“It used to be when customers would call and said, ‘I’m thinking of cutting the cord,’ they’d throw all sort of promotions to keep them from leaving,” said Craig Moffett, an industry analyst at MoffettNathanson LLC. “Now they’re saying, ‘Goodbye, it’s been fun, enjoy the broadband subscription.’”
Cable One Inc., a smaller cable company with about 305,000 residential video customers, even helps cord cutters choose between online alternatives like YouTube TV or Hulu’s live TV service, according to Moffett.
Executives at big cable companies say they have no plans to stop selling TV altogether, because offering more services along with internet access gives customers more reasons to stay. At the conference, Rutledge said Charter wants to create “relationships” with customers and “to the extent that video helps drive that or helps us market that, it’s a valuable asset.”
But cable executives are now focused on what they call “profitable” or “high-quality” video subscribers and less interested in cutting deals. At another investor conference in May, Comcast Chief Financial Officer Mike Cavanagh said he wants a subscriber who “really values video and our bundle despite the increases in prices,” and has “the wallet for a fuller video experience.”