As the famous Johnny Mercer song implores, "You've got to accentuate the positive ..."
And I would expect no less from a CEO in remarks leading off a quarterly earnings conference call. However, the best number that Mike Lovett, CEO of Charter Communications (Nasdaq: CHTR), could come up with at the top of yesterday's earnings call was "the best evidence of our progress is new customer satisfaction, which is more than 35% higher than for our more tenured customers."
That is better than a stick in the eye, but it couldn't eliminate the negative, which is a sixth straight quarter of negative earnings.
One reason for the red numbers in the bottom line is that Charter is quickly losing video subscribers, 65,000 in the last quarter alone, 80,000 in the previous quarter.
The times they are a-changing
There is no question that cable operators in general are losing video subscribers. Some numbers from the second quarter of this year: Comcast (Nasdaq: CMCSA), down 238,000 subscribers, and Time Warner Cable, down 128,000.
The only video providers that aren't losing subscribers -- and are actually gaining -- aren't cable companies but telecoms. AT&T's (NYSE: T) U-verse TV gained 202,000 subscribers during the second quarter; Verizon's (NYSE: VZ) FiOS TV gained 184,000 during the same period.
But there is also little doubt about where those cable video subscribers are going -- to their computers, where they can get their video entertainment cheaper, or even for free. But the cable guys aren't fighting this techno shift; they are embracing it. Instead of concentrating on being providers of video to the TV sets in their subscribers' homes, their focus has shifted to becoming the pipeline to their subscribers' home networks.
In other words, they have realized they can make more money as broadband Internet service providers than as cable TV companies. (Or lose less money, if one's a cynic.)
Be the Internet...
Charter's Mike Lovett put it this way during the conference call: "[There's a] bit of a mantra within the company to think of ourselves as an ISP." He added that changing the company's thinking also "... supports the video business and other products and services ... particularly as the infrastructure evolves to all IP."
Charter's new plan is not to fight the video streamers, but to promote itself as a gateway to streaming media. To that end it has launched a search tool on its Charter.net portal that subscribers can use to find video streaming content from Netflix (Nasdaq: NFLX), Amazon (Nasdaq: AMZN), and Hulu, as well as from Charter's own video content.
But it's one thing to turn existing video customers into broadband Internet subscribers; getting new customers is a different proposition entirely. To do that, Charter says it is targeting homes that now have DSL Internet service from AT&T and CenturyLink (NYSE: CTL). It is also looking to add broadband subscribers from its new partnership with Dish Network.
I can't wait to see whether any of this will work. But we'll just have to wait another three months to see what the positive will be in the next earnings conference call.
- Add Verizon Communications to My Watchlist.
- Add AT&T to My Watchlist.
- Add Netflix to My Watchlist.
- Add CenturyLink to My Watchlist.
- Add Comcast to My Watchlist.
- Add Charter Communications to My Watchlist.
- Add Amazon.com to My Watchlist.
