Finance

Rutledge: We’re Not Fighting OTT

Charter chief says replicated video OTT product still doesn’t make sense 9/12/2017 5:07 PM Eastern Last updated at 9/13/2017 12:39 PM
Tom Rutledge

Charter chairman and CEO Tom Rutledge argued that cable operators should embrace over-the-top and direct-to-consumer offerings to give customers more options, but added he still doesn’t see a compelling model for cable operators to offer their own OTT service.

At the Goldman Sachs Communacopia conference in New York Tuesday, Rutledge said Charter is already putting direct-to-consumer services onto its user interface platform that can be delivered to TV sets and other devices via the internet.

“We embrace whatever products our customers want to use as part of our value proposition, we’re not fighting it in any way,” Rutledge said. “We will enable those direct-to-consumer services, and to the extent that they pressure the bundle from a pricing perspective, that may work out to our advantage in many ways.”

But Rutledge said he doesn’t see any advantage in cable operators going over-the-top themselves.

“The bundling of the significant players in content still exist in the OTT world just as it does in the MVPD world,” Rutledge said. “There’s not a lot of differentiation we can cause by selling it over the top. What’s the advantage? Going outside of our service area? I don’t know the value of just replicating our own service OTT.”

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Rutledge added that technically you can stream any content, the real question is how it’s packaged, presented and priced whether it’s going to satisfy the consumer.

“We’re selling in our fully featured rich package of video to about 98% of video orders, most consumers want it,” Rutledge said. “If you price it right and make it fully featured and fully valued, we think it is still a sticky product.”

He added that Charter is experimenting with some niche offerings targeted at data-only customers, but even that group is more influenced by pricing than anything else.

“We haven’t seen a breakthrough yet that makes us think we should change our business model, but we keep pushing around the margins to see if there is anything there,” Rutledge said. “Interestingly, data-only customers, who you’d think would be the coolest cord cutters around, tend to be the easiest people to sell bundles of fully featured video to, because they’re price driven. They actually do want it all and its price that keeps them from buying it all.”

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Rutledge added that Charter has restarted its all-digital initiative, put on hold during the early stages of integrating Time Warner Cable into the fold, and all its system should be fully digital by the end of 2018.

“Our assets actually work better in a two-way on-demand world than they did in a linear world from a value perception perspective relative to competitors,” Rutledge said. “I think we have a big advantage against satellite going forward that is even more pronounced now than it was a few years ago.”

On the minus side, Rutledge added that prices are still high and ratings are down as viewers are diverted to other activities like social media, but he still sees growth ahead.

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“I think there are challenges to the video business that didn’t exist, and they are going to continue to be challenging, but we still have increasing advantages on a relative basis,” Rutledge said. “I think we’ll have more video customers three years from now than we do today. I’m not sure the whole category will be bigger, but I think we will be.”

Helping to boost those numbers will be the addition of new products, like wireless. Charter expects to begin employee field testing of its wireless offering through its Mobile Virtual Network Operator (MVNO) agreement with Verizon, in 30 to 60 days, with a broad launch expected in Q2 next year.   

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