One of the largest cable operators in the United States has a message for media companies: the traditional cable television model is broken and it must be fixed or abandoned.
Cable TV is too expensive for consumers and providers, Charter Communications, which has nearly 15 million pay-TV subscribers, said in an 11-page presentation to investors Sept. 1. The company added that unplugging subscribers and rising prices contribute to a “video vicious cycle.”
The presentation comes as negotiations between Charter and The Walt Disney Company, owner of popular cable channels like ESPN and FX, have been made public. The channels will not be offered to Charter subscribers until the two parties agree on how much Charter will have to pay Disney to carry its channels. These distribution fights are commonplace in the media industry, with channels going down for days or weeks on cable networks owned by companies like Charter, while the two sides squabble over the value of those channels.
But Charter’s presentation goes further. Charter makes a scathing indictment of the cable television industry, which has generated billions of dollars for companies like Disney and Charter for decades. This is a notable acknowledgment from Charter, one of the companies behind much of this growth.
“Customers are leaving the traditional video ecosystem and losses have accelerated,” according to Charter’s presentation.
In a statement early last week, Disney said it was in negotiations with Charter Communications and that many of its channels had become inaccessible to Charter subscribers due to the impasse they were in.
“We are committed to finding a mutually acceptable solution with Charter, and we urge them to work with us to minimize disruption to their customers,” Disney said in its statement.
The dispute centers on the rates Charter will pay for Disney programs and how those movies and shows will be distributed to Charter customers. Charter says it doesn’t want to pay premiums for channels its customers don’t watch, adding that rate increases are pushing customers away from cable.
Christopher Winfrey, CEO of Charter, said on a conference call with investors on Friday that he was “disappointed” with the impasse he was in with Disney. He added that the company offered an alternative model that Disney did not accept.
“We’re moving forward with a new collaborative video model, or we’re moving on,” Winfrey said.
As viewers shift away from cable TV in favor of streaming services like Netflix, companies like Charter and Comcast are increasingly focusing on providing other services to consumers, including internet and wireless services. They have turned away from pay-TV, which is in slow decline, and find it frustrating to pay extra for content that fewer and fewer people are watching through traditional means.
Content providers like Disney are making adjustments themselves. The media giant said it plans to offer a streaming version of ESPN, one of its most valuable television channels, which has long been a mainstay of the traditional cable offering. Robert Iger, the CEO of Disney, said he is looking at different options for ESPN, including finding a new distribution or content partner.
On Friday, Charter said it offered a subscription package that included both traditional TV and streaming apps, but Disney rejected its terms. Charter said it’s ready to forgo Disney’s channels and embrace “alternative video solutions,” including services offered by Apple and Roku.
Charter plans to separate some sports programming, including regional sports networks, into a more expensive package called Spectrum Select Plus. Ms. Winfrey said on Friday that she did not push Disney to agree to include ESPN in this package.
