The threat of further direct-to-consumer content consolidation shouldn’t worry traditional pay TV distributors, Altice USA CEO Dexter Goei said at an industry conference Tuesday, because it will help MVPDs weed out what has been an albatross around the industry’s collective neck for years -- unprofitable video customers.
Analysts expect that other content companies could follow Discovery and WarnerMedia’s attempt to create a streaming video behemoth, but Goei, speaking at the JP Morgan Technology, Media & Communications conference, said that could be an economic boon for traditional distributors.
With pay TV subscriber rolls steadily eroding over the years, it is evident that consumers are already moving toward an over-the-top, direct-to-consumer model. As content providers look to get larger and gain more streaming scale, Goei said it could allow traditional MVPDs to focus more on highly profitable broadband service, and weed out low-margin video subscribers.
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“Larger players with a full package of offerings on the direct-to-consumer side is good for our business because it focuses our customers on -- instead of 6-7-8 different choices -- on something a lot smaller that in many respects replaces a video consumer that is less and less valuable to us,” Goei said. “And it allows us to focus primarily on our broadband product, allows us to be a partner for content on a direct-to-consumer basis as opposed to a partner on a linear basis and I think will dramatically improve the economic trends of our business from a cash flow standpoint.”
Goei added that the increased focus on DTC offerings could be an advantage for distributors come carriage renewal time, as the equation shifts toward the DTC model. He added that all of Altice USA’s programming partners have some kind of DTC offering.
“For us, you want a consumer to be a long-term video subscriber that’s a profitable subscriber, [and] you don't want a video subscriber that’s under three years,” Goei said. “Those [under three-year subs] are the ones that are shifting toward the direct-to-consumer offerings and that's good for us. It’s beneficial to our economics. It makes our priorities very clear, in terms of where we focus our capital allocation and our efforts.”
And that means that distributors are going to look hard at DTC offerings when negotiating future carriage deals.
“We are going to revisit every equation,” Goei said. “... I think we are going to go through, I would call the next two or three years where you will probably see a big transformation in the MVPD world as to how we partner with our content providers. Because it's not sustainable to continue to see price increases every year with viewership falling.”
