Charter Communications Has The Ability To Withstand the COVID-19 Recession
(Photo : Charter Communications Has The Ability To Withstand the COVID-19 Recession)

Despite many countries reopening their economies, the business world is still feeling the pinch of COVID-19. The cable industry was impacted in the same way that every industry was - experience a slump in new accounts and an increase in cord cutting. However, one cable company, in particular, is poised to survive the pandemic.

Charter Communications, which is the parent company of cable TV and internet provider Spectrum, is doing better than expected during the global shutdown. Admittedly, some areas of the company are more impacted than others and are less likely to do well. Still, some areas are seeing a small surge in activity as the US population adjusts to their new reality.

Charter Communications is one of the largest cable internet and cable TV providers in the US. It is expected to do better than most of its competitors despite the pandemic and various downturns in the company.

Which areas will do well and which won't?

Spectrum Cable Internet

Spectrum cable internet has seen an increase in internet speed upgrades since the beginning of the crisis. As more people are working from home or are furloughed, there is an increase in cord cutting, leading to speed upgrades. Many Americans who are working at home are attracted to the Spectrum internet packages because of their speed and pricing. Cord cutting is the act of canceling your cable TV subscription and using strictly streaming platforms like Netflix, Hulu, Amazon and YouTube TV.

Consumers still want to watch their favorite shows and movies, but they don't want to keep a traditional cable package, which is often more expensive than a single streaming subscription. However, to fully enjoy a streaming experience, users need high-speed internet, especially if more than one person is streaming shows at once. Consumers are reaching out to their service providers to upgrade their internet speed to meet this need.

Charter will likely continue to have an increase in internet upgrades and a decrease in cable subscriptions, which is a boon for the company's cable internet sector. However, analysts predict that there won't be an increase in new internet subscribers as the country braces for a recession that some say will be worse than the Great Recession of 2008/2009. If a consumer didn't have home Wi-Fi going into the pandemic, they aren't likely to subscribe during the recession.

In the end, cable internet will have an increase in spending through upgrades and a downturn in new users signing on with the company. The two will cancel each other out, but that may change once the recession becomes more of a reality.

Spectrum Cable TV

As mentioned above, cord cutting is already a factor in Charter's success and failure during the pandemic. Before COVID-19, the cord-cutting movement was strong as consumers hoped to save money by canceling traditional cable TV and signing up with services like Hulu, YouTube TV, Amazon and Netflix. Hulu and YouTube TV offer a live TV option to mimic the cable experience. While the channel offerings are more limited than the Spectrum channel lineup, Hulu + Live TV and YouTube TV offer a unique and sometimes less expensive way to enjoy network television and shows you can't find on Netflix.

The main issue with switching from cable television to streaming is that many consumers subscribe to multiple streaming platforms to get all the shows and movies in which they are interested. This typically leads to a high monthly cost similar to cable. However, many consumers still see a lot of appeal in streaming and are cutting their cable bill.

Charter is witnessing a decrease in both current subscribers and new subscribers since the start of the pandemic. This will continue as the recession worsens, and people try to keep more money in their pockets. Cord cutting is a boon to cable internet, but it is a significant obstacle for cable TV that Charter is still working on a way around.

Overall, cord cutting is hindering cable TV but is still a positive for Charter because of the need for faster internet to binge-watch Netflix originals.

Business Services

The commercial market is as affected or more so than the other parts of the company. Already, businesses are closing in droves, and the recession will cause many more to shut their doors. COVID-19 is wreaking havoc in every industry and those businesses that survive the initial storm will look for ways to save money by cutting services.

Small and mid-size companies are the most likely to close and they also make up a large portion of Charter's commercial subscribers. Businesses have already started cutting their TV, internet and landlines to help keep their company afloat.

Business services makes up 14% of Charter's TV revenue, 60% of which comes from small and mid-size companies. While it's difficult to predict the extent of which COVID-19 will affect these businesses, it's likely that Charter will lose much of that revenue in the coming months.

Mobile Services

Mobile is a relatively new area for Charter and has only just started to get traction in the market. Charter is going up against heavy hitters like Verizon and AT&T, which is no easy feat. However, Charter is offering budget-friendly mobile services that have enticed enough consumers to make the company relevant in the mobile market.

Now, however, fewer consumers are looking to upgrade their devices or switch mobile providers, which will directly impact Charter's mobile bottom line. It seems most people want to see what's going to happen and get a feel for how well they will do during the recession before making any large purchases or changes in their lives.

With the steep downslide in the US economy, wireless services will see fewer new subscribers overall. However, there might be a different outcome in which consumers look for lower-cost mobile plans and switch from larger companies like Verizon to budget companies like Charter Communications. The actual result will come soon enough.

In the End

Charter will see some failures and some successes during the pandemic and recession. Many of the two will cancel each other out, which, while not necessarily a positive during a healthy market, will make Charter Communications one of the most successful cable providers during the crisis. Some analysts also predict that Charter will both weather the COVID-19 storm well and see some earnings growth through 2020 and beyond.

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