The Charter-Cox Merger Won’t Fix the Cord-Cutting Problem

The nation’s biggest pay-TV provider is getting even bigger — and not a moment too soon.

Cable giant Charter unveiled plans on Friday to merge with Cox in a $34.5 billion deal. The deal could offer the companies a lifeline at a time when the pay-TV business is on shaky ground and losing subscribers to cord-cutting.

A Charter-Cox combination would be better equipped to battle Comcast in broadband internet, cellphone service, and pay TV. Leaders at both companies pitched the merger as a win for customers, employees, and even America — a not-so-subtle olive branch to Trump.

The transaction is expected to close in the next two years, pending approval from the Trump administration. The new entity would be called Cox Communications and adopt Charter’s Spectrum branding for customers.

There are many reasons Charter and Cox joining forces appears to be a “no-brainer,” media analyst Jeffrey Wlodarczak of Pivotal Research Group said.

By teaming up, Charter-Cox can save on marketing costs while investing more in product and technology, Charter CEO Chris Winfrey said Friday on a call announcing the deal. He added that the combined company would have a broader geographic reach.

This tie-up may also give Charter-Cox some much-needed leverage in carriage negotiations. Charter’s 12.7 million video customers, more than Comcast’s 12.1 million. That makes it the leading player in the rapidly shrinking pay-TV industry. The Cox merger would bring the companies’ total to 14.4 million.

Cutting down on cord-cutting

There are advantages to being the biggest fish in a pond that’s drying up.

While cord-cutting may be inevitable, Charter has used its leverage to slow the decline by convincing media companies to include their streaming services in its bundles at no extra charge to customers.

This arrangement is win-win. For programmers like Disney and Warner Bros. Discovery, it keeps carriage fees coming when they may otherwise shrink due to cord-cutting. Before this concession, Charter had scoffed at paying the rates Disney wanted to carry its networks.

Meanwhile, Charter’s subscribers receive more value by getting streaming services for free, giving them a strong incentive not to cut the cord. Cox customers are set to get the same deal that has helped Charter reduce its cord-cutting rate from a low of 9.5% in the second quarter of 2024 to 7.3% in Q1 of this year. That’s according to an analysis by equity research firm MoffettNathanson.

“Our video losses are probably the best in the MVPD industry,” Winfrey said on Friday’s call, using the industry term for pay-TV providers. “And we intend to improve that.”

The resilience of Charter’s streaming-saturated cable bundle, which includes Disney+, Peacock, Paramount+, and the soon-to-be-renamed HBO Max, has impressed analysts.

“Don’t look now, but Charter’s ‘linear-plus-streaming’ video strategy might just be working. Video subscriber trends are getting … wait for it … BETTER!” Craig Moffett of MoffettNathanson said in a note after Charter’s first-quarter earnings report.

Moffett was thrilled with the proposed Cox merger. He wrote in a Friday note that it was “very, very welcome” and had “almost no downside.”

“Charter’s video retention rates are already by far the best in the industry, and that’s largely in advance of the benefits of the streaming-included strategy, which is only now achieving full availability,” Moffett wrote.

Cox’s footprint could give Charter even more negotiating power with programmers, though Winfrey said he aims to “work together” with them.

But despite Charter’s best efforts, including its reimagined cable bundle and potential synergies with Cox, even Winfrey knows the days of growing the pay-TV business may be over.

“Whether that means just less losses on video, or more video growth, I’m not in a position to go forecast that today,” Winfrey said. “But I think it can be better than what it is on its current trajectory.”