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Charter CFO: Programming costs to drop despite investment in original content

Even as Charter Communications Inc. is investing in new original content through its partnerships with major network owners, the company expects its programming costs to decrease in 2018.

Speaking during a Feb. 2 earnings conference call, Charter CFO Christopher Winfrey said the company's programming expense increased by $258 million, or 10.8%, in the fourth quarter of 2017 as compared to the year-ago period. He attributed the increase to contractual rate growth in renewals and a higher expanded customer base and mix. In 2018, Winfrey said programming costs for video customers will grow at a slower rate than 2017.

"That reflects the significant amount of programming renewed in the last 15 to 18 months. And that expected decline in growth rate applies whether or not you include the small investment we expect to make in exclusive original content," Winfrey said.

In 2017, Charter renewed and expanded its distribution agreement with Viacom Inc. to include a co-production deal for new original content that will exclusively premiere for subscribers on Charter's platform in the U.S. Viacom's Paramount Television unit and Charter will jointly produce programming under the agreement.

In addition, Charter entered a similar content partnership with AMC Networks Inc. in 2017, under which AMC Studios will develop and co-produce original programming, with exclusive co-branded content for Charter's Spectrum platform.

"Working with our long-standing programming partners has allowed us to leverage their expertise in creating compelling original content as well as to defray costs," Charter CEO Tom Rutledge said during the call. He noted Charter's experience with its local news networks, including those in New York and Tampa, Fla., has demonstrated that "well branded, high-quality programming can have a meaningful differentiation and customer retention benefit."

But Rutledge noted it is also early days for the content deals and Charter will gauge their success as time goes on.

"We've done two arrangements, one with AMC and one with Viacom, slightly different in scope, but they essentially create a window of opportunity for us to use content," he said. "So we'll see where it goes. But it's an opportunity for us to be associated over a period of time with original content."