Kable Town

The Bundle Is Dead, Long Live The Bundle!

Happy Monday War & Peaceniks! Won’t you take me to… Kabletown?

Last week, America’s two largest broadband and cable TV providers, Charter and Comcast, released their 4Q earnings and results.

Financially, Comcast had mixed results, with 4Q revenue basically flat YoY, up just .07%, yet up 4.3% for the full year. Their EBITDA was down 5% in 4Q, yet up 5% for all of 2022. Charter, despite headwinds in their sector, announced 4Q revenues up 3.5% and a full year increase of 4.5%. Their EBIDTA was up 1.9% in 4Q and up 5% for the year.

(Continuing my ongoing campaign to promote reading things that are important, you can read Comcast’s 4Q earnings here; and Charter’s earnings here.)

However, after digesting both companies’ earnings, I became less interested in their financials and more focused on a different set of performance metrics: their customer relationships. This consumer data gives us a full body MRI on the state of our entertainment economy.

These are the results most people think of when we discuss MVPD customer numbers.

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As expected, Video subscribers were down for both companies in 2022. Comcast’s TV subs fell 11% - a whopping loss of more than 2 million subscribers. Charter lost 686K video subscribers, a drop of 4%. These “cord cuttings” were unsurprising to anyone who understands Media, even rudimentarily. More worrying to these companies and their shareholders, however; Broadband sales for both have slowed to a stop, and their LAN line phone customers are dropping like a bad prank call - both down 11%, with a combined customer loss of more than 2 million users.

These numbers illuminate a major issue for the entertainment ecosystem: the disintegration of the MVPD bundle is eroding the financial underpinning of much of our Media universe. As the Cable bundle has disintegrated, profit margins from phone and broadband services have helped prop up Pay TV, for about a decade, which in turn have continued to generate addictive licensing revenues for TV and film publishers and studios.

And that is why, when Netflix appeared as a clear and obvious existential threat to the Pay TV industrial complex, yet also came bearing gifts of ENORMOUS paydays above and beyond the norm, Hollywood and their Cable TV partners ignored the threat, and took the cash.

The decomposition shows up in a different set of metrics, which very few in our industry track; but which unveil far more about the bundled media economy, and also provide a picture of where it might successfully go from here.

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