Charter Communications (NASDAQ:CHTR) has seen a steady decline in cable customers. That continued in the third quarter, when it lost 54,000 pay-television subscribers. That’s a drop in the bucket for a company with 16.6 million cable customers, but it’s part of a disturbing trend.
The cable industry saw a marked increase in cord-cutting in Q3, with just under 1 million customers leaving. That’s the most customers to leave traditional pay television in a single quarter ever, and even though the largest declines came from satellite providers, Charter still saw its stock fall. After closing November at $329.20, shares in the company fell to $284.97, a 13% drop according to data provided by S&P Global Market Intelligence.
Unlike many of its major rivals, Charter makes most of its money selling cable and internet services. It’s not a major owner of content, and it doesn’t have a secondary business that insulates it from increasing cord-cutting.
On the other hand, broadband customer increases have kept Charter’s revenue growing even as it loses cable customers. The company added 308,000 internet customers in Q3 — a number that more than offsets its losses in cable.
The problem, or at least the fear, is that broadband is approaching saturation and cable losses are going to increase. That’s a combination Charter can do little to protect itself from, and it will likely be a drag on the business going forward.
Charter has lagged behind some of its rivals when it comes to offering streaming services and other alternatives to traditional cable. It’s likely to suffer steady declines in pay-television customers as cord-cutting increases.
It may be years before Charter starts to see major declines that aren’t offset by new broadband customers, but the cable giant needs to find a way to either diversify its business or entice customers not to cut the cord. Given the wealth of options cheaper than cable, the latter is going to be a very tall order.