Charter Offers Ad-Free Disney Plus Upgrade Option, Tries to Goose Its Moribund ‘Future of Video’ Strategy

Charter Communications’ hard-won carriage renewal deal with The Walt Disney Co. last September was viewed as a watershed moment for pay TV, with the cable operator securing unprecedented abilities to bundle OTT services including Disney Plus Basic and ESPN Plus at no extra charge to its remaining 9.5 million Spectrum TV Select customers.

Outlining the strategy of ditching lesser-watched linear channels like Freeform and integrating popular SVOD services to investors during its memorable two-week standoff with Disney, soon-to-be-triumphant Charter CEO Christopher Winfrey described the hybrid OTT/pay TV model, which could be delivered and maximized over Charter’s Xumo connected-TV device JV with Comcast, as the “future of video.”

Also read: Disney and Charter Patch Up ‘Broken’ Pay TV Model, Sign Distribution Agreement

But earlier this month, Puck ’s John Ourand reported that less than 10% of Charter's TV Select base has signed up for the ad-supported version of Disney Plus since it became available on the platform in January, even though the SVOD, regularly priced at $7.99, comes at no additional cost to the Spectrum subscriber.

“At first glance, this seemed like the future: adding new streaming offerings desired by consumers and dropping lightly-watched linear TV channels,” LightShed analyst Richard Greenfield noted after reading Ourand’s post. “Unfortunately, it does not appear to be working out that way for Charter. It looks more and more like Disney’s Bob Iger outmaneuvered Charter’s Chris Winfrey.”

On Friday, during Charter's second-quarter earnings call , Winfrey outlined some changes to Disney's SVOD offerings.

For starters, Spectrum TV Select customers will, starting later on in the third quarter, have the option of signing on to ad-free Disney Plus Premium … if they’re willing to spend an additional $6 a month.

And in Q4, Charter will also add Disney’s Hulu as a $2-a-month add-on.

“Our efforts to deploy a new hybrid DTC linear model first for the industry remain on track and we expect it to be fully deployed next year,” Winfrey said. “Together with Xumo , our goal is to deliver utility and value for our customers irrespective of how they want to view content and better and more stable economics for programming partners.”

Winfrey also reiterated the foundation of the strategy — Charter customers shouldn’t have to pay twice for the same content, delivered cia linear channels and streaming services.

“Customers can’t be forced to pay twice and if the DTC standalone pricing is less-expensive at retail, then that’s what we really should help programmers sell instead," Winfrey added. “Fundamentally, we believe that evolving the video business, even if it isn’t growing, helps customer acquisition and retention, still has positive cash flow, it provides us with option value. And over time, we believe a high-quality video product gives us the opportunity to reintroduce more value into the converged connectivity relationship.“

Undoubtedly, some Spectrum TV Plus customers — those who hate commercials — are paying twice for Disney Plus, Greenfield noted, so this move should address part of the problem.

Greenfield, however, wondered how many of Charter's video customers — who tend to be older and have more money than the median Disney Plus base — want the SVOD in the first place.

"It’s also possible that if you are wealthy enough to afford the bloated $100+/month cable bundle from Charter, the last thing you want is Disney Plus with advertising," he wrote.

With an older user base, many of whom are alien to an app-based world, lack of awareness could also be a factor in Disney Plus’ slow uptake on Spectrum TV Select.

“If you have legacy Charter Spectrum hardware, you cannot tune into a channel to watch Disney Plus, you need to use the app on a smart TV or a third-party streaming device,” Greenfield said. “Even if you have a newer Xumo-based streaming box from Charter that integrates linear TV and streaming, Disney Plus is still a separate app from watching live linear channels inside the Spectrum app (you cannot stumble upon Disney Plus, the way you stumble upon a new channel). We wonder how many Charter subscribers even know they can add Disney Plus at no additional cost?”