Comcast, Charter Take Hits from Video Subscriber Losses, Storm Damage

Comcast and Charter Communications combined lost nearly 230,000 video subscribers in the most recent quarter, though Charter CEO Tom Rutledge said he expects the company's video sub loss history to turn around despite price and piracy pressures. Comcast CEO Brian Roberts said changing consumer habits and "aggressive video activity from incumbents" are a challenge.

Content distributors "are securing their product so ineffectively" that password sharing is a major problem, Rutledge said. He said Charter anticipates gaining market share in video due to its product bundles even as the overall video category continues to decline.

For the quarter, Charter lost 104,000 residential video customers, most of them Time Warner Cable limited basic video subscribers, Chief Financial Officer Chris Winfrey said. The company also added 249,000 broadband customers and 27,000 voice customers. Comcast said it added 182,000 broadband customers in the quarter and lost 125,000 video subscribers and 94,000 voice customers. Charter shares closed Thursday at $316.29, down 8.3 percent. Comcast closed at $36.27, down 1.5 percent.

Even with the declines, Comcast is outperforming an overall pay-TV industry that is shrinking at 3.5 percent a year, MoffettNathanson analyst Craig Moffett emailed investors. Comcast will continue to lose video subscribers, but "it will ... inevitably take share from satellite on the way down," he said. New Street Research analyst Jonathan Chaplin said Charter's worsening video subscriber trends aren't highly concerning since most of the money the company generates from video subscribers is offset by broadband when subscribers cut the cord.

Comcast said the summer's hurricanes cost it an additional 20,000 video customers atop the 105,000 it otherwise would have lost and 26,000 broadband customers in addition to the 214,000 it added. It doesn't expect further customer impacts from the storms. For Charter, Irma and Harvey cost 10,000 to 15,000 customer relationships, some of whom might come back in Q4, Winfrey said. He said the storms also cost Charter about $4 million in residential customer bill credits and $8 million in cleanup and call center costs.

Comcast said it exceeded 250,000 lines on its Xfinity Mobile wireless product since its May rollout. The wireless service is available only bundled with broadband and is a reinforcing strategy, said Roberts, saying once the company hits a certain scale -- "hopefully in the next year or so" -- every subscriber will be profitable. He said the company expects to add a million broadband customers by year's end for its 12th consecutive year. The cable operator said DOCSIS 3.1 will be available to most homes in its footprint by year-end. Roberts said its Instant TV streaming video service launched in September won't be pushed broadly but the company will "use it surgically” as a retention effort.

Rutledge said Charter's wireless partnership with Comcast (see 1705080046) has been a help as it heads toward its own wireless offering rollout by Q3. "We've learned a lot from them," he said, adding the two might jointly run their wireless operations "from a back-office perspective." Rutledge said Charter is field testing its wireless service.