Terrapin Note- Following recent comments from TWC, Charter's highly respected CEO Tom Rutledge comments about the prospects of moving away from the cable set top box as a means to deliver video services to consumers. This is very much in line with our medium term bearish thesis on ARRS, where we continue to bide our time for the right entry points to increase our short position as the shares leak higher. His comments about programming costs also shed light on the overall attractiveness of the content driven video business in line with our 2/25 report
Charter CEO Rutledge envisions world without set-tops
Charter Communications (Nasdaq: CHTR) will be able to reduce capital spending on set-tops by delivering video to Apple's (Nasdaq: AAPL) iPad and other IP-connected devices that subscribers use in their homes, and may eventually be able to stop buying cable boxes, CEO Tom Rutledge said Wednesday.
"We're moving to a world where I don't think we'll have to buy CPE [customer premise equipment]. I think we'll be able to make our product work on the devices people have," Rutledge said at the Deutsche Bank 2013 Media, Internet & Telecom Conference.
Time Warner Cable (NYSE: TWC) CEO Glenn Britt made a similar prediction last May during The Cable Show convention in Boston. The MSO began streaming its entire channel lineup through Roku Internet video set-tops this week, and is working on similar apps for connected TVs from Samsung and other consumer electronics manufacturers.
Rutledge touted the benefits that will come from a cloud-based interactive program guide that Charter will deploy this year. Comcast (Nasdaq: CMCSA) and Cablevision (NYSE: CVC) have deployed similar guides, which allow subscribers to use both cable remote controls and mobile devices such as the iPad and smartphones to navigate live TV and video-on-demand programming.
"A TV guide displayed on a TV using a remote control is an inherently inferior way to search for content than using a touchscreen," Rutledge said.
The Charter chief also offered a colorful analogy when asked about the rising costs of programming and the often contentious negotiations cable operators have with cable networks and TV stations.
"It's like that scene in [1978 war drama] The Deer Hunter, where you're in that cage in the river with the rats crawling all over you, and every once in a while you get pulled up to play Russian roulette," Rutledge said. "We're sort of all trapped in the cage with the rats."