Shares of Charter Communications (CHTR 4.57%) were down 9.6% as of 3 p.m. ET Friday after the telecommunications company posted mixed quarterly results. It appears the market is also concerned over the fallout of a dispute Charter resolved with entertainment giant Walt Disney during the quarter.
NASDAQ: CHTR
Key Data Points
On Charter's mixed quarter, fallout from the Disney dispute
Charter's third-quarter 2023 revenue increased 0.2% year over year, to $13.58 billion, translating to net income of $1.255 billion, or $8.25 per diluted share (up from $7.38 per share in the same year-ago period). Analysts, on average, were anticipating lower earnings of $8.11 per share, but on higher revenue of $13.64 billion.
Digging deeper into Charter's results, total internet segment customers increased by 63,000 to roughly 30.6 million, while mobile lines served grew by 594,000 to a total of 7.2 million. At the same time, however, Charter's residential video customers decreased by 320,000 during the quarter. During the conference call, CFO Jessica Fischer estimated around 100,000 of those video disconnects and 15,000 lost internet customers were directly related to the temporary loss of Disney programming early last month.
The dispute between the two companies lasted just over a week around the start of college football season, and involved Charter's demand to include ad-supported versions of Disney's streaming services (Disney+, ESPN+, and Hulu) as part of its cable package. Charter ultimately agreed to pay higher carriage rates to Disney as part of the resolution agreement, though specific financial terms of the deal weren't disclosed.
What's next for Charter stock?
Also during the earnings call, Charter CEO Chris Winfrey said the revised agreement with Disney represents "a new hybrid distribution model that is good for consumers," adding that the new deal "better aligns video content and [direct-to-consumer] apps, which will be included for free in our video packages."
In the end, Charter did find a way to partially participate in the rise of streaming alternatives to its more comprehensive cable TV packages. But it seems increasingly clear that Disney ended up on the better end of the resolved dispute -- and not before Charter endured some very tangible damage in the form of customer disconnects. Coupled with its mixed quarterly results relative to expectations today, it's hard to blame some investors for parting ways with Charter stock.
