Charter Exceeds Q2 Forecasts, Sees Less Carriage Drama As Pay-TV Operators Get Cut In On Streaming Action

Charter exceeded Wall Street estimates in the second quarter, reporting earnings of $5.29 a share and revenue of $12.8 billion.

Analysts’ consensus expectation was for earnings of $4.79 and revenue of $12.6 billion.

Broadband gains were more modest than the boom times of 2020, when high-speed connections became crucial during the onset of the coronavirus pandemic. Still, residential internet customer levels increased by 365,000 in the quarter. The company, which is the No. 2 U.S. cable operator, shed 63,000 video households.

During a conference call with analysts, executives described an evolving pay-TV environment. Operators who traditionally had focused on carrying networks and often fought with programmers over fee increases have instead prioritized broadband service and, in the case of Charter and some others, wireless.

CEO Tom Rutledge was asked whether a recent distribution deal with ViacomCBS was perhaps a new model given the marked decrease in carriage drama of late. He described it as “a modern agreement” that “recognized that the video business is changing.” Under the terms of the deal, Charter can participate in the direct-to-consumer streaming ambitions of ViacomCBS, which just launched the rebranded Paramount+ and operates other streaming outlets.

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Years ago, streaming was viewed purely as a disruptive threat. Today, Charter brings in a lot of revenue from its enabling of streaming and is looking to find more ways to do so. As Rutledge put it, “We’d like to be part of the marketplace.”

Rutledge also said there’s an “opportunity, depending on the model,” for Charter to bring in significant revenue from advertising delivered via streaming. An increasing number of outlets, from newcomers like Peacock and HBO Max to longtime players like Crackle and Hulu, have advertising as a key strategic pillar. Gateways to streaming like Charter can also share in transactional revenue, Rutledge noted, which is a big business for tech giants like Amazon and Apple.

Charter’s advertising revenue surged 65% in the quarter, reaching $411 million, though the company noted the comparison with the Covid-19-affected year-ago period.

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