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Rutledge: Video Theft Becoming an ‘Issue’

Charter Communications CEO Tom Rutledge, never a fan of subscribers who share their TV Everywhere passwords with family members outside of their homes, said that practice, especially with college students, is cutting into pay TV subscriber growth results.

While he said that lower household incomes are a big factor in the decline of overall pay TV subscriber rolls -- people simply can't afford pay TV -- Rutledge added that service theft is becoming an increasingly important problem.

“A lot of the TV Everywhere product and other products available online is not secured well,” Rutledge said. “You have people joking about sharing passwords and authentication on award shows. That ‘s a real issue.”

Rutledge pointed to the college market, where Charter has been successful in selling data-only to students, but not so much video because they are using their parents’ authentication passwords to get video for free.

“The lack of control over the content by content companies and the authentication processes has reduced the demand for video because you don’t have to pay for it,” Rutledge said. “Because of our sales techniques, we’re actually growing. But there is a trend there that is negative that is associated with the lack of authentication processes.”

Charter finished the third quarter with 12,000 basic video subscriber additions.

Later, Rutledge said a lot of the video theft blame rests on content providers, who have encouraged consumers to watch via their own apps.

Rutledge said that by allowing consumers to access their content for free, programmers are lowering its overall value.

“At a core level they haven’t been in that business before and haven’t really thought through what they’re doing,”  Rutledge said of content companies.  “Now they are sending their signal out themselves and they don’t seem to have thought through what the implications of that are and they have created a problem where they have devalued their own product. It’s a real issue.”

 The Charter CEO kept it simple when explaining why the company has managed to grow video customers while competitors have seen their growth slow.

“The competition continues to aggressively promote products at lower price points,” Rutledge said. “We think fundamentally we have better products than they do.”

Charter is moving forward with its planned purchases of Time Warner Cable and Bright House Networks and still hopes it can close the deal by the end of the year. Rutledge didn’t have many details to give on the process, but said once the deal is done, Time Warner Cable systems will likely follow Charter’s pricing regime, which could mean the elimination of modem fees and a lowering of set-top box charges.

“We would tend to go toward our pricing model,” Rutledge said in response to a question about the set-top and modem charges. Time Warner Cable raised some hackles when it first implemented the fees in 2011 for new customers, extending the charges to include existing subscribers in 2012. The company increased the fees in most of its markets from $3.95 per month to $5.95 per month in 2013. 

He added that Charter is interested in participating in the upcoming broadcast spectrum auction, but that the company has made no firm decision.

“We’re interested in it,” Rutledge said. “We are in a very awkward situation given the pendency of our deal [with Time Warner Cable and Bright House] to be able to participate in that. But we are exploring it.”