Q. I read that Charter actually added video customers last year compared to everyone else like DIRECTV losing subscribers in big numbers. How did they do it? Isn’t everyone cutting the cord now? Wouldn’t Charter lose subscribers just like everyone else? — Jerry, Marina Del Rey, California.
Jerry, you’re right. Charter, which owns the Spectrum TV service, just revealed that it added a net of 19,000 residential video subscribers in 2020, compared to a decrease of 484,000 in 2019. That net gain is incredible considering that DIRECTV and U-verse combined for a net loss of around three million customers in 2020 while Comcast lost 1.3 million, Verizon reported a net loss of 298,000, and Dish is expected to report a significant loss as well. (Dish has yet to release its year-end results.)
Small to mid-sized cable TV services are also losing subscribers due to cord-cutting, and the need to raise subscriber prices largely because of escalating carriage fee demands from programmers.
So what is Charter doing that the others are not? Two things.
1. Charter has no contracts
Unlike most major pay TV providers, such as DIRECTV and Dish, Spectrum TV does not require a new customer to sign a two-year contract which includes a termination penalty of $10-20 a month for every month left in the agreement if you leave early. (Consumers agree to the two-year deals because it includes lower prices or other incentives such as free HBO Max.) In fact, Charter’s Home Page for Spectrum says bluntly, ‘No contracts, no risks.’
This is particularly appealing to cord-cutters who often cite the two-year contract requirement as a major reason for dropping their cable/satellite service, or never signing up in the first place. Charter is making it easy for them to give Spectrum a try.
In addition, the cable operator’s base offer (TV Select) is just $44.99 a month for the first 12 months (not counting the $16.45 broadcast TV surcharge, and equipment charges, which can be around $10 a month). You get more than 125 channels with that package, which is more than what YouTube TV, Hulu Live or AT&T TV offer in any live streaming plan.
And like the live streaming services, you can drop Spectrum at any time without a penalty.
2. Their rivals have contracts
Again, Charter is targeting consumers who are weary of contracts by offering a ‘contract buyout’ that you will give you up to $500 if you switch to them.
“In a contract? Don’t worry, we’ll buy it out up to $500,” the cable operator states on its web site.
To get your penalty payment, you must install and actively maintain a Triple Play plan throughout the redemption process. That is defined as the time from when you send in the required documentation to when you receive payment. But after that, you could cancel at anytime.
Charter has not revealed the number of people who have taken the contract buyout, but considering that its satellite rivals have lost so many subscribers, it’s not hard to speculate that some of them have signed up with Spectrum.
Many former cable and satellite customers have subscribed to the live streaming services because they offer lower prices and no contracts. But Charter’s combination of a low base price, no contracts, and the contract buyout offer makes Spectrum TV an attractive option as well.
In a conference call last week with financial analysts, Charter CEO Tom Rutledge was asked how Spectrum has managed to add video subscribers when everyone else is losing them.
“Our video strategy is to continue, obviously, to sell the products that we have historically sold and to sell them with a reasonable margin attached to them… And that includes the addition of new video tiers or products that may be skinnier or differentiated or targeted in a way that they create customer satisfaction at (a) reasonable price,” Rutledge said.
Translate that from corporate speak and it says, lower prices with no strings attached.
Rutledge acknowledged that it may be difficult for Charter to continue adding subscribers in a fiercely competitive industry, particularly as programmers continue to raise their fees. But for now, his plan is working.
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— Phillip Swann