Charter sees early momentum from recently opened Spectrum App Store

Charter Communications Inc. is benefiting from its hybrid approach to video and believes it will chart more progress now that its video app store is open.

The distributor's Seamless Experience package features linear cable networks, but also gives Spectrum video customers access to myriad streaming services, with values exceeding $100 per month, at no extra charge.

In October, the company unveiled the Spectrum App Store, a digital marketplace where Spectrum TV customers can activate, manage and upgrade the streaming apps included with their video plans. The Spectrum App Store also allows nonvideo customers to purchase and manage streaming apps on an a-la-carte basis.

Charter President and CEO Christopher Winfrey told investors at the UBS Global Media and Communications Conference in New York on Dec. 8 that customers have been activating three apps into their service on average. He called that adoption rate "pretty good" and "pretty rapid," considering the company has just started to market the digital video app store and smooth out the activation process.

Gimmick gripes

Winfrey rhetorically questioned why the integration rate is not 100%: "There in comes the rub, which is, customers have become so accustomed to a promotional offer or for lack of a better word, a temporary gimmicky type offer" that will subsequently lead to higher prices for them.

The executive said it has required help from programmers to convince customers that this "isn't a gimmick, that it isn't a promotion, it is included as part of your service."

Winfrey did not provide guidance at the UBS event on Charter's video subscriber performance in the fourth quarter. During the third quarter, Charter lost 70,000 pay-TV subscribers, compared with 294,000 subscriber losses in the corresponding 2024 period.

On Charter's earnings call, Winfrey attributed the lower subscriber losses to significant product improvement over the past two years. That time frame dates back to a 2023 carriage pact with Walt Disney Co. that gave Spectrum customers free access to the ad-supported version of Disney+ and ESPN+. The company subsequently signed a host of distribution pacts that continued carriage of the programmer's linear networks but added access to their streaming services at no extra charge, leading to its Seamless Experience offer.

Charter now offers Disney+, ESPN+ Hulu LLC, HBO Max, Paramount Skydance Corp.'s Paramount+, NBCUniversal Media LLC 's Peacock, AMC Entertainment Holdings Inc.'s AMC+, ViX, The Tennis Channel Inc. and Fox Corp.'s FOX One. Collectively, those streaming services retail for $116 per month. That lineup is slated for expansion to include Discovery+ and BET+, which will bring the value to $125 monthly.

Winfrey noted it is still early days for Charter's Seamless Experience. "Once the first app is activated, they tend to pretty quickly start moving up the chain because they see, one, it's pretty easy to activate. Two, it is for free. It's not a gimmick. And so I think you'll see that go up over time."

Listen to Tom Montemagno, executive vice president of programming acquisition for Charter, discuss the company's Seamless strategy in the below "MediaTalk" episode:

Customer acquisition

In particular, Winfrey thinks the streaming value part of the offer, the $100-plus worth and live video, will appeal with younger adults and "resonate a little bit differently than people of our age."

Asked about broadband customers and the Seamless Experience, Winfrey said the package has helped with churn. "When you take a look at a customer who's been with us for 20 years, 10 years or zero to six months, that's a pretty dramatic churn reduction across the board," he said, adding that most Spectrum video customers are also Internet customers, meaning it helps Charter's broadband business as well.

Although helping with churn, Winfrey said the Seamless offering has yet to translate into customer acquisitions. "It hasn't gone viral yet," he said.

"The ability to use Seamless entertainment and Seamless connectivity is a way not just to have churn improvement, but to drive acquisition," he said. "We haven't yet seen that. And I think that's the real opportunity."

Cox update

As to Charter's pending $36.70 billion acquisition of Cox Communications Inc., Winfrey expects the deal to close by mid-2026.

"We're well into the process, answering all kinds of questions from the regulators, and we're committed to getting them comfortable as quickly as we can, both in federal and at a state level, so the process is going well," he said.

Winfrey noted that Charter's scale will drive mobile opportunities in "a pretty significant way," and the adoption of the Seamless Experience will increase video penetration rates in the Cox footprint.

The CEO sees an opportunity to grow advertising revenue stemming from "a potentially growing video environment," as well as addressable capabilities.