How The Big Charter-Cox Deal Will Impact The TV Business

It’s been a long time since the fortunes of cable companies were determined by their video business.

We all know about cord cutting and how the number of people subscribing to traditional pay TV, offered via cable, satellite and telephone companies continues to shrink. We also know that for cable companies, the most profitable business is broadband, while the fastest growing businesses are mobile and business to business service. Charter and Cox certainly do.

Bottom line: the acquisition of Cox Cable by Charter Communications won’t help cable TV as it’s being choked out by streaming. In fact, it’s likely that programmers will see less distribution revenue as deals originally made with Cox transition to the (less favorable to programmers) Charter Terms.

That’s not to say there’s no silver lining in the deal for the TV business. Charter has taken a bold approach to getting its video customers all of the desirable programming on streaming services, especially those launched by the traditional broadcast-owning media companies. Starting with the Walt Disney Co., Charter has made deals that give its customers access to streaming programming at no additional cost.. That means viewers can watch Disney+, Paramount Plus, TelevisaUnivision’s ViX and even the new (don’t call it flagship) streaming service from ESPN.

Respected cable industry analyst Craig Moffett called Charter’s video strategy “compelling” in a note Friday.

“We assume that Charter's agreements with programming affiliates (that allow Charter to offer video packages that include all streaming options for no additional charge) will be ported over to the Cox customer base relatively quickly,” Moffett said. “Charter's video retention rates are already by far the best in the industry, and that's largely in advance of the benefits of the streaming-included strategy.

Chris Winfrey (Photo courtesy of Charter)

On a call with analysts and investors Friday to answer questions about the deal with Cox, Charter CEO Chris Winfrey conceded that simply losing video customers slowly would be a win for the combined companies–and for the programmers as well.

“There's no better economic way for them to have programming delivered to customers than through the MVPD relationship that we offered and the integration of seamless entertainment,” Winfrey said.

“While we're not neutral yet, our video losses are probably the best in the MVPD industry, and we intend to improve that,” Winfrey said. “That means that we're working together, and that's new. It's not a relationship we have with the programmers now is not to battle in war every three, four years. It's really about, how do we work together along the way? How do we do quarterly meetings to evaluate how we go to market better and help each other so that it works better for the consumer and save customers actually lots of money,”

But growing video revenue will be difficult at best. Like everyone else in the industry, Cox has been losing video subscribers. Even if Charter is able to successfully run its playbook with Cox subscribers, “whether that means just less losses on video or more video growth. I'm not in a position to forecast that today, but I think it can be better than what it is on its current trajectory,” Winfrey said.

Rather than video, the Charter-Cox deal pivots on mobile, according to Moffett.

“On their merger announcement conference call, Charter management was careful not to say too much about the portability of their MVNO agreement, but our assumption is that Cox will be brought into the Charter MVNO deal just as Charter itself was when Charter acquired Time Warner Cable and Bright House,” Moffett said. For a variety of reasons, Cox is relatively late to the wireless game. But that only means that the opportunity in their footprint is that much larger.”

Adding Cox also dovetails into Charter’s efforts to built its business services business.

“Cox is the leader in the industry in Business Services and is well ahead of Charter in serving the Enterprise segment, in particular,” Moffett notes. “Cox is also widely viewed as offering best in class customer service in the residential segment (an admittedly low bar for the cable industry, but the fact remains that Cox is viewed more favorably by its customers than almost any other cable company).”

On the conference call, Winfrey said that when the acquisition of Cox closes, job one will be providing Cox customers with Charter’s array of product and pricing choices. That includes the Spectrum TV app and Xumo, the streaming joint venture between Charter and Comcast.

Winfrey said combining the companies also allows them to expand investment in product development, AI tools and innovation, accelerating product development and driving greater efficiencies,

The deal has to be approved by the Trump administrations, so Winfrey commented that “the new combination will return jobs from overseas and create new good paying customer service and sales careers. This combination is good for America.”

He added that the connectivity business is highly competitive. ”There is no overlap between the two companies. And I think from a competition standpoint, this is good because it allows us to actually invest more into the footprint, to have better products, have better service, invest more in AI and invest more in US based jobs.”

Businesses like consolidation and this combination sees $500 million in savings from synergies alone. But Moffett maintains that this deal will not transform the cable business as we know it.

“That Cox was at last willing to accept a merger proposal after saying "no" so many times is a testament to the recent success, or perhaps rather to the promise, of Charter's still relatively new bundling and packaging strategy. Charter's mobile-first convergence strategy looks like it is working, and that strategy can be easily ported to Cox. So can Charter's streaming-included video strategy,” Moffett said.

But he noted that Cox is already well-run,so there aren’t big gains to be made by making its operations more efficient..

“Still, none of that should dampen the enthusiasm for a very, very welcome deal that brings benefits to both entities . . . with almost no downside whatsoever,” Moffett said.

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Cross-platform TV ad measurement company iSpot said it named Steven Millman as chief scientist.

Millman most recently had been global head of research and deata science at Dynata. Before that he was chief scientist at MRI Simmons.

“Millman brings unmatched expertise in measurement and analytics that will strengthen our strategic vision and execution, extending the value iSpot brings to both brands and publishers,” said Sean Muller, CEO and founder, iSpot.

Steven MIllman (Photo courtesy of iSpot)

Two years ago, ISpot hired Leslie Wood as chief research officer, who had been with NCSolutions. Six months ago, Wood said she had resigned from iSpot

iSpot said that Millman’s hire comes at a pivotal time for the advertising industry as brands, advertisers and publishers are hyper-focused on ROI and measurement-based outcomes amidst economic uncertainty.

In his new role at iSpot, Millman will lead the evolution of iSpot’s data science strategy across Creative, Audience and Outcomes measurement, deepening iSpot’s value to both brands and publishers, the company said.

iSpot also said it is re-aligning its teams to be more synergistic following key acquisitions and rolling out products and insights that help brands.