At the September 1,
2023 Investor Webcast, Charter's CEO, CFO and President of
Product and Technology Presented the Company's Vision for Evolving
the Video Business, and Desire for The Walt Disney Company to Join
the Company in Leading the Industry Towards a Customer-Centric
Business Model
Key highlights are below, and a full replay
of the investor meeting can be found at
ir.charter.com.
STAMFORD, Conn., Sept. 1,
2023 /PRNewswire/ -- Charter Communications, Inc.
(along with its subsidiaries, the "Company" or "Charter") today
provided an update on its contract negotiation dispute with The
Walt Disney Company. Following are key highlights from the
meeting.
Overview
We respect the quality video products that
The Walt Disney Company produces as well as the experience of its
management team. But the current video ecosystem is broken, and we
know there is a better path that will deliver video products with
the choice consumers want.
The Walt Disney Company and Charter are uniquely capable to lead
the way, which is why we are disappointed that thus far they have
insisted on unsustainable price hikes and forcing customers to take
their products, even when they don't want or can't afford them.
They also want to require customers to pay twice to get content
apps with the linear video they have already paid for. This is not
a typical carriage dispute. It is significant for Charter, and we
think it is even more significant for programmers and the broader
video ecosystem.
We have proposed a model to The Walt Disney Company that we
believe creates better alignment for the industry and better
products for customers. It is a model that could both stabilize
linear video and create a clear growth path for direct-to-consumer
(DTC) video, with a more customer-friendly and financially
attractive end-state for programmers.
Background
This situation didn't come about overnight,
and it isn't one programmer's fault. For the last decade, linear
video subscription services have been in decline, fueled by the
migration of valuable programming to DTC options coupled with a
vicious cycle of programming cost increases and subscriber
losses.
- Over the last five years alone, the linear video industry,
including both traditional and virtual multichannel video
programming distributors (MVPDs), has lost nearly 25 million
customers, almost 25% of total industry customers. It is
staggering.
- At the same time, programmers have moved content out of their
linear channels to a la carte direct-to-consumer offerings, with
limited advertising and permissive password rules.
- Over the past four years, The Walt Disney Company's cable
portfolio has seen significant viewership declines– across
sports, general entertainment, and most dramatically in children's
programming, where they have created a DTC substitute for
children's content – Disney+.
Nonetheless, as we entered negotiations, The Walt Disney Company
proposed a long-term deal that continues to ignore the realities of
a shifting marketplace with:
- Higher license fees
- Demanding we pay for customers that do not receive its
services, leading to more price increases
- Even less packaging flexibility than we have today
We believe that renewing a traditional distribution deal in line
with The Walt Disney Company's current offer would ignore the
realities of today's video business and accelerate its decline.
We do not take this decision lightly. For 2023, we had
expected to pay The Walt Disney Company more than $2.2 billion for just the right to carry that
content, not including the impact of advertising on either party.
But we have reached a precipice and must chart a path to
change.
Charter's Offer
Charter has offered The Walt Disney
Company the opportunity to create a partnership that we believe
could transform the industry and help restore our mutual video
business to growth. As part of the solution, Charter would accept
The Walt Disney Company's "market" rates in exchange for:
- Lower penetration minimums to deliver package flexibility for
our customers
- Inclusion of their ad-supported DTC apps within our packaged
linear products so the customer does not have to pay twice for
similar programming
- Charter's commitment to market their DTC products to our
broadband-only customers
For our Customers, this model creates the
compelling video product we all want as consumers: flexibility to
choose from a variety of high-quality packages with varying content
and pricing to meet their viewing and budgetary needs.
For The Walt Disney Company, we
believe this model provides a glidepath to manage its migration
pace to a larger DTC business, including the ability to stem linear
subscription and advertising revenue losses, reduce DTC churn,
increase advertising revenue and likely drive more upgrades within
their digital television apps. Ultimately, it provides a more
sustainable revenue stream, in our view.
For Charter, it renews our incentive to grow
linear video relationships, enhances our flexibility to retain
price-sensitive linear customers, and provides new incentives to
sell DTC subscriptions to broadband-only customers.
We offered The Walt Disney Company a shorter-term contract
extension, with penetration minimums that would allow us to
continue to provide flexible options to consumers. However, The
Walt Disney Company has informed us that they would not be willing
to accept a contract extension.
Conclusion
With The Walt Disney Company, we have
proposed a model that we believe creates better alignment for the
industry and better options for our customers. We are at the edge
of the precipice, which The Walt Disney Company itself forecasted.
For more than a decade, executives and analysts have acknowledged
that the path of linear video is unsustainable, and the business
model must evolve. Analyst Craig
Moffett has stated that "linear TV is hanging by a thread"
and that "[i]t all comes down to Disney."
We think the opportunity for customers and all of us as market
participants is too big, too important, and too timely to pass up.
The Walt Disney Company and Charter have the opportunity to work
together on transforming the industry for the long-term benefit of
both companies and their customers. Without them, we need to pivot
to other models to drive value for our connectivity relationships.
We are either moving forward together with a collaborative business
model, or we're moving on.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This communication includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended, regarding, among other things, the potential
offering. Although we believe that our plans, intentions and
expectations as reflected in or suggested by these forward-looking
statements are reasonable, we cannot assure you that we will
achieve or realize these plans, intentions or expectations.
Forward-looking statements are inherently subject to risks,
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factors described under "Risk Factors" from time to time in our
filings with the SEC. Many of the forward-looking statements
contained in this communication may be identified by the use of
forward-looking words such as "believe," "expect," "anticipate,"
"should," "planned," "will," "may," "intend," and "potential,"
among others.
All forward-looking statements attributable to us or any person
acting on our behalf are expressly qualified in their entirety by
this cautionary statement. We are under no duty or obligation
to update any of the forward-looking statements after the date of
this communication.
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SOURCE Charter Communications, Inc.