Hello, and welcome to the Charter Communications conference call. We ask that you please hold all questions until the completion of the formal remarks, at which time we'll give instructions for the question-and-answer session. Also, as a reminder, this conference call is being recorded today. If you have any objections, please disconnect at this time. I'll now turn over the call to Stefan Anninger.
Thanks, operator, and welcome everyone. I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings, which we encourage you to review carefully. Various remarks that we make on this call constitute forward-looking statements, which are subject to risks and uncertainties. Any forward-looking statements reflect management's current view only, and Charter undertakes no obligation to update such statements. On today's call, we have Chris Winfrey, our President and CEO, Rich DiGeronimo, our President of Product and Technology, and Jessica Fischer, our CFO. With that, I'll turn the call over to Chris.
Thanks, Stefan, and thank you all for joining the call. I recognize the timing isn't ideal for many of you. Programmers choose expiration dates that drive the most leverage, leverage for them by inconveniencing our collective customers. I'd like to start with a message for those of you on this call who are also our video customers. I'm sorry that Disney's removed its programming from your lineup, and for the majority who don't actively watch Disney content, I'm sorry Disney has made you pay for channels you don't watch. We've almost always avoided these kind of disputes and disruption to your service, but we had to draw a line in the sand on your behalf.
We haven't been able to stop programmers from increasing the cost of their channels and your packages, but we think that making sure you get value and flexibility in the programming you pay for, well, that's worth fighting for. So thanks for your patience. For our shareholders, analysts, and other constituencies, let me say first how disappointed we are to be in this position. We've generally been able to manage relationships with our programming partners behind the scenes. We respect the quality product that Disney produces and its management team, but the video ecosystem is broken. Over the last five years alone, the linear video industry, including both traditional and virtual MVPDs, has lost nearly 25 million customers, almost 25% of total industry customers. It's staggering.
I'm disappointed that Disney so far has insisted on higher prices, forcing customers to take their products when they don't want them or can't afford them, and asking us to require customers to pay for direct-to-consumer apps their linear fees already pay for. We know there's a better path. We also believe that Disney and Charter are uniquely capable to lead the way, so we're on the edge of a precipice. We're either moving forward with a new collaborative video model or we're moving on. This is not a typical carriage dispute. It's significant for Charter, and we think it's even more significant for programmers and the broader video ecosystem. We've proposed a model to Disney that we believe creates better alignment for the industry and better products for customers.
A model that could both stabilize linear video and create a clear growth path for direct-to-consumer video, with a more customer-friendly and financially attractive end state for programmers. Given how much of the expense is tied up in sports, Disney has to lead instead of pursuing the same playbook, which drives a vicious cycle of video customer declines. Ultimately, Disney gave us a choice: to either carry on with the bad path for consumers or to look to completely new video models for our customers. Because we've reached a point of indifference under the current industry model, we have a unique ability to stand firm for a deal where Disney and Charter cooperate to create video products that are valuable and relevant to consumers. This situation, it didn't come about overnight, and it isn't one programmer's fault.
Early on, the video industry had the opportunity to embrace changes in the way consumers access content through concepts like TV Everywhere. As an industry, we failed to come together quickly to create that consumer-friendly product. Programmers then made high-value content available for anyone to access on websites, and soon thereafter, through emerging streaming applications such as Hulu, which was initially free. At the same time, programmers believed that their content libraries could create so-called incremental streaming service revenues by selling this content to Netflix. That content, originally created for the multi-channel video universe, was removed from those who paid for it and devalued in SVOD environments with no programmer branding on the content they produced, no advertising, and very little content security, all driving massive cannibalization of traditional multi-channel video products by SVOD providers, while programmers still pushed up linear pricing.
Programmers also deployed their own a la carte direct-to-consumer streaming services, which initially eliminated advertising revenue and had little security, fostering password sharing. The capital markets rewarded eyeballs, and as a result, programmers then pulled the content back from third-party services like Netflix to hold exclusively for their own DTC services. They also continued to raise rates for their traditional products carried by MVPDs to fund their DTC efforts. They enforced packaging and carriage restrictions while they sell their own direct-to-consumer products a la carte and require the carriage of little-watched channels through the practice of tying, putting even more pressure on the traditional multi-channel video universe.
When capital markets turned their focus back to profitability, programmers began raising rates on ad-free versions of their DTC services, enabled ad-supported versions of their DTC products, again started to syndicate content back to SVODs, and only now, after many years of massive password sharing, are programmers talking about reining in this enormous problem. Ironically, they're now discussing the benefits of DTC bundling. All the while, programmers have asked linear video customers to fund their mistakes. So that's the well-known story of how we got here without a coherent DTC strategy, with programmers constantly chasing the winds of the capital markets, and we believe the time for a more coherent strategy is now. Rich DiGeronimo, our President of Product and Technology, will cover why we care and our solution.
As Chris mentioned, the multi-channel video ecosystem has lost nearly 25% of customers over the past five years, while Charter's video customer base has declined only by about 10% over the same time period. So why is Charter outperforming its peers? First and foremost, we have not given up on video like so many others. While the financial benefits from video have deteriorated, we continue to believe that a compelling Charter-branded video product offering can be an important part of our portfolio of connectivity services. We also believe there is strategic option value in serving a large audience of video customers as the ecosystem evolves and potentially reconstitutes into a more consumer-friendly model. Second reason we have lost fewer customers than others is we offer flexibility in our pricing and packaging approach. Many Charter customers have opted for lower-priced content based upon their viewership needs and/or affordability.
However, this flexibility is very much limited by programmers' carriage packaging requirements, including how they tie content. Third, we have a high-quality video product. Whether you want every channel, Expanded Basic or smaller packages on a traditional set-top box or on a retail streaming device like a Roku, Apple TV, Samsung TV, Xbox, or Xumo, we have it all. There aren't many scaled distribution channels that can provide that breadth of content, especially live TV, and that level of functionality. But the overarching problem with multi-channel video is its lack of affordability due to expensive programming and inability for distributors to offer lower-priced packages to suit the needs of customers. We have a large group of customers subscribing to video packages that do not include sports or other Disney content.
Disney wants us to pay license fees for customers that do not receive its services, which leads to more price increases. We cannot get comfortable forcing that on customers. So why Disney, and why Charter, and why now? For us, we are at a crossroads, economic indifference, really, with our video product offering. And Disney is at a crossroads with its D2C apps and traditional linear TV strategy. Over the past four years, Disney's cable portfolio has seen significant viewership declines across sports, general entertainment, and most dramatically in children's programming, where Disney created a direct-to-consumer substitute for children's content, Disney+. These D2C substitutes for linear TV, which MVPDs and their customers have essentially funded, have been used to create exclusive content on programmer direct-to-consumer apps, and we believe has driven the movement of viewership from linear TV.
We believe that if a programmer's linear content and/or similar exclusive content is available in its direct-to-consumer app, then that app should be included with the associated linear package. Disney has acknowledged that the most sensible financial outcome for Disney content, and specifically ESPN, is a hybrid approach, whereby it is able to retain a sizable portion of today's linear television revenue from the cable bundle, including Charter's business, while incrementally growing in the D2C streaming space. We believe that Charter and Disney are ideal partners to establish a hybrid linear TV and direct-to-consumer model. As Charter is a pure-play connectivity company, Charter has the necessary scale and presence in key markets like New York and L.A., and Disney has a key asset in ESPN that is widely seen as the linchpin for the evolution of the video ecosystem.
As the negotiation process for a new affiliation agreement with Disney started earlier this year, Disney offered Charter a traditional longer-term agreement with higher license fees, high penetration minimum payments, even less packaging flexibility than we have today, and even floated the idea of requiring distribution and payment for their direct-to-consumer apps to our linear video customers. Disney's offer would have created a massive price increase for both customers who watch Disney content and the many who do not. Their offer ignored the realities of today's video business and would accelerate the decline of our video customers. So we offered Disney something different, the opportunity to create a partnership that we believe could transform the industry and help restore our mutual video business to growth. Our offer included several components. We agreed to Disney's supposed market rate increases, but requested carriage flexibility relative to their asks.
We also agreed to support ESPN going direct to consumer, so long as Disney's ad-supported, direct-to-consumer video applications were made available to our packaged linear customers at no additional cost. This was coupled with a commitment from Charter to market Disney direct-to-consumer products to our broadband customers. This new distribution model could bring significant benefits to Disney, Charter, our customers, and the overall industry... For Disney, we believe it provides a glide path to manage its migration pace to a larger direct-to-consumer business, including the linchpin, ESPN. It stems linear subscription and advertising revenue losses, preserves at-risk linear TV cash flow, and potentially the traditional TV ecosystem, reduces D2C churn by pairing these direct-to-consumer apps with a linear subscription, likely drives more upgrades within its D2C apps, increases D2C ad revenue, and leverages Charter's significant marketing and sales engine to distribute direct-to-consumer apps to Charter's broadband-only customers.
Ultimately, it provides a more sustainable revenue stream for Disney because it works better for customers. For Charter, this new model renews our incentive to grow linear video relationships with a much more compelling value proposition, where all linear TV and complementary direct-to-consumer apps are included. It enhances our flexibility to provide customers with packaging choices, which help attract and retain price-sensitive linear customers and drive package upgrades in the future. It also provides new incentives to sell direct-to-consumer subscriptions to our broadband-only customers. For consumers, this model creates the compelling video product we all want, while providing a strong value proposition for a high-quality product. We can create a blueprint for programmers and distributors that also works for customers. We all win. Disney was unwilling to agree to the transformative partnership we offered.
They rejected proposals that we believe were good for customers and would have stabilized Disney's linear business while allowing it to grow its D2C business. Disney simply reverted to the tired playbook, trying to squeeze every last dollar out of the linear customer with no regard to the going concern of their video cash flow engine. And yesterday, Disney removed its content from Charter's video customers. We are still hopeful that Charter can reach an agreement with Disney, one that would benefit both companies and our customers. With that, I'll turn the call over to Jessica.
Thanks, Rich. While Rich covered our offer to Disney, I'll briefly discuss where things currently stand and potential customer and financial impacts to Charter in a prolonged dispute. While we made some small steps in our affiliation agreement negotiation, Disney continued to insist that we pay for Disney content on an even higher number of video customers than we pay on today, and which would require us to pay license fees for customers not receiving any Disney content. Disney also introduced other D2C bundle requirements that would have created incremental costs for Charter and our customers, further straining our ability to economically sell and retain video subscribers. Given the impasse and broader strategic questions that Disney reported in the press, we offered a shorter extension of the current contract with some incremental relief on penetration minimums that would allow us to continue to provide flexible options to consumers.
Our offer was predicated on a dedicated effort by both parties to develop and operationalize a transformational long-term plan. Disney declined. Our video business is already challenged. Renewing a traditional distribution deal beyond a short time frame, particularly with the pricing and packaging required by Disney's current offers, would result in an even more rapid deterioration of our video business. It could turn our video product from an asset to our connectivity business to a liability. We believe the model we are proposing can create growth opportunities for both Charter and Disney. Without Disney carriage, we need to pivot to other video models to drive value for our connectivity relationships. As time passes in this dispute, a portion of Charter's customers who watch significant Disney and ESPN content will drop their video service.
Our incentive to carry Disney will decrease, and because of that, the likelihood of a permanent drop will increase. So we're at the edge of a precipice, which Disney itself forecasted. This is not a classic carriage dispute. We're hoping that our shareholders will weigh in and support a better path forward for the video ecosystem. The loss of Disney video content would have a wide range of potential impacts to Charter. It's very difficult to predict impacts to customers and financials with any certainty, but I will walk through the key points to consider moving forward. Approximately 25% of our total video customers are regularly engaged with Disney content, and about half of those customers are highly engaged with Disney content.
We're currently working with the most engaged of those viewers to find alternative video solutions while Disney content is not available in our packages, and if the loss becomes permanent, Charter will pivot to alternative video solutions. The impact to video and internet net additions is difficult to predict, however. We anticipate a portion of Disney video customers may cancel their video service as time goes on. While we expect the vast majority of those video customers to retain their overall relationship with Charter, the current situation could impact some broadband customers as well. Going forward, we would expect video sales to decline if Disney content is permanently removed from our packages.
If we are moving on without Disney, we still have a powerful distribution and service capabilities, and we'll be happy to package programmers' DTC services, including through platforms like Xumo, Apple TV, or Roku, so long as it works for our customers and our shareholders. We anticipate some video-related revenue loss as a result of the dispute, given the expected decline in video customers and any potential credits or rate adjustments to video customers, even if the outage is brief. In addition, we would expect reduced advertising revenues related to the lost content. On the cost side, we expect significant reductions to programming expense given the license fees we pay to Disney, which we expected to be over $2.2 billion for 2023, absent the current dispute.
Offsetting some of that, in the short term, we expect to incur higher costs to handle a large number of customer calls. There's also the alternative path that we laid out. A transformative deal with Disney could stabilize customer losses in our video business and open the door to utilizing our full distribution capabilities to drive growth in DTC services for our broadband-only customers as well, enhancing our cash flow from both video and broadband-only customers. As Rich laid out, we think that is the best path. That path is the best one for Disney and the broader ecosystem, too. However, if we are unable to come to a deal and ultimately move on from the traditional video business, the margin profile of our business should improve and its capital needs should decline. With that, I'll turn it back over to Chris for closing remarks.
Thanks, Jessica. We didn't take any of the decisions that got us here lightly. We think the opportunity for customers and all of us as market participants, including shareholders, is too big, too important, and too timely to pass up. I am optimistic we can find a path forward with Disney. We have tremendous respect for their products, brand, and management team, but we need to move quickly forward together or move on. If we move on, as Jessica mentioned, some of our video customers will go elsewhere, but for the majority of our video customers who aren't actively engaged with Disney and ESPN product, we believe that subscription revenue will be lost for Disney. And at that point, you have to wonder why we would ever pay an ABC broadcast station a retransmission fee again.
With the most expensive piece of content and its time requirements removed, that would create new flexibility, interesting linear packaging and pricing capabilities for non-sports customers, alternative video combinations through a la carte DTCs, and potentially other partnerships which can add value to our connectivity bundles based on viewer interest and budget. So we'll take a few questions now, but we will stay away from any more detailed potential deal terms. Operator?
At this time, if you'd like to ask a question, please press star five on your touch tone phone. You may remove yourself from the queue again by pressing star five. We'll now pause for a moment to allow the queue. Thank you. Our first question comes from Craig Moffett with MoffettNathanson. You may please unmute your line.
Hi, thank you. Two questions. First, can you describe Disney's response to the proposal that you laid out for the alternative video model? Did they simply reject the concept out of hand, or did you get to the point of discussing the concept and weren't able to reach agreement on the terms of the proposal? And then, was there an intermediate proposal of any kind, like decoupling sports and programming and moving to something closer to an a la carte tier for sports that they rejected and that you proposed, or was your proposal simply the new video model that you discussed?
Yeah. Hey, Craig, this is Chris. So I'm, I'm gonna try to balance being transparent where possible without you know, damaging the potential future discussions we hope to have with Disney. You know, we've, we've had ongoing discussions with Disney, and, and they've been constructive for months, and I think there's elements of what we're doing, in fact, a lot of what we're doing, that they you know, would say is creative and thoughtful. And I don't think there's a debate that the linear video business has issues. I don't think there's a debate that, you know, both parties want a glide path to a direct-to-consumer space that also makes sense in combination with linear video.
But I think the, I think the issue comes down to uncertainty around short-term, cash flows, it comes down to precedent, and it comes down to unwillingness to lean into the benefits that Rich laid out. And so the natural tendency, you know, and uncertainty, is to model in all the potential negatives and not to consider any of the positives. And I think that's, you know, frankly, the issue that we've had. Our proposals, I know, you know, overnight there was some press outlets that were asking, did we try to push for ESPN being put into our RSN model, which we announced a few weeks ago, or into some type of à la carte? That was not the case. I would love that.
I think that would be very constructive for consumers, but we knew that was a stretch too far. We never put something like that on the table. We really were trying to enhance the value of the expanded basic product, what we call Select today, and give customers real value both today and in the future, and really unchain you know, programmers generally from feeling that they had reservations about going D2C, because that's where they want to go. And the simple solution to that is to preserve the linear video system, make sure that they get the full value of what they're already paying for. And the temptation to force content down customers' throats...
Even if they're not watching it with high penetration minimums and inclusion in packages, and then maybe getting them to pay twice through DTCs, you know, it appears to be tempting, and we just couldn't do that. We couldn't do that to our customers, and if that's the path that we're heading down, we think relative to that scenario, there's plenty of other potential innovative paths that we can go and we can move on.
Craig, the only thing I would add is, you know, and as Jessica mentioned, we did offer a shorter-term extension to the agreement, with, you know, some flexibility improvements, just given the nature of the video ecosystem right now, and that was rejected.
All right, got it.
Thanks, Craig.
Thanks, Craig.
Thanks, Craig. Luke, we'll take our next question, please.
Our next question comes from Ben Swinburne with Morgan Stanley. Your line is now open.
Thanks. Good morning. Can you guys hear me okay?
Hey, Ben. Yep.
Great. Yeah, two questions. I guess first on your business, maybe for Jessica. Can you help us think about the potential impact on broadband and wireless a bit more? You know, 25% of your video customers, I'd imagine a lot of those are bundled, if not the, you know, the vast majority. You know, what are you guys doing to sort of put into place some tactics to try to ensure you don't lose, you know, connectivity customers and, you know, any sort of help in thinking about the impact there over the next couple of months, assuming this, or, you know, longer, assuming this drags on?
Ben, I'll actually take that.
Sure.
Look, the connectivity services that we provide are valuable. You're right, a lot of those engaged viewers are also broadband customers, but this is different than what it was years ago because there's so many different alternatives that are out there and available that you can get on a, you know, flick of the wrist that's available out there. That doesn't mean we want that to happen. And so as time goes on, we'll have a strategy developed to make sure that we treat customers appropriately and fairly as it relates to credits. That's the first step.
The second step is if that's not enough to keep them temporarily in place on their current video product, then we will help them downgrade the video product, and we'll actually help them with alternative sources of video content where they can go get the channels that they're looking for. Plenty of it exists, and it exists in different forms and different places. And I think longer term, if that's where we ended up and that we ended up moving on, I'd expect to have a pretty attractive commercial relationship for us to be able to enable that type of migration.
But I've not really thought about this as a significant risk to our broadband or connectivity solutions, because of the quality of what we provide, together with the mobile and broadband, standalone and bundled, but also because of the wide availability of this content in different forms, which is new relative to just a few years ago.
Yeah, that makes sense.
There's one thing I'll add to it, Ben, just, you know, we removed bundled discounts from our packages a couple of years ago. So, as a result, even, even if you do have customers who are sort of pulling, pulling video, the impact that that has on the pricing on broadband, in our system today is, is minimal.
Okay. That's very helpful. Thank you. And I guess my second one is, you know, I, I think your discussion, Chris, of how we got here is spot on, particularly around programmers kind of devaluing their networks as they move to content to streaming. But I would actually push back a bit on the ESPN point. In that context, ESPN's pretty distinct from ESPN+ . I think most of the premium rights are on ESPN. Just from listening to your and Rich's presentation, specifically to Disney, it seems like the ESPN piece, which is where all the, you know, the bulk of the cost is for you and your customers, is really about packaging flexibility.
I know you, you sort of pushed back on the RSN comparison, but I just wonder if you could talk a little bit more about that, because it seems like that's, if we sort of distill this down, maybe the heart of the issue. And then if I can just, you know, continue the, the line of thought on sort of the devaluing point, it would seem like this is, that there are other programmers, I don't need to name them here, with, who have, you know, which have engaged in that strategy, and even more significantly than Disney. So, does this, is this a leading indicator of where Charter is gonna go in the future with its other programmer relationships?
So on the last question, simply put, yes. And we always thought that Disney was in a position to be in a leadership role for the entire industry, precisely because of the reason that you mentioned is that ESPN to date, hasn't gone direct to consumer. But they've also been very vocal that they're going to go there, and that it's just a matter. It's not a question of if, it's a question of when. And, you know, when you're entering into a multi-year deal and you have a very, very, very high-priced piece of content, several channels that are associated with it, that is forced to be put into consumers, the majority of which don't actively engage with that content, and they're forced to pay for it.
The idea that somebody's publicly said repeatedly that it is going to go direct to consumer, and you're signing up to that type of long-term deal, it also... You know, that's, that's untenable. And, and in addition to that, it also drags along because of ESPN+ and ESPN, it drags along a bunch of channels that aren't watched, that are high, you know, high cost, that are fully available, and then some, in alternative forms at a cheaper price. And our customers are again, forced to pay high prices for that content, whether they watch it or not. And so when you put that whole package together, you know, I agree with what you said, that ESPN hasn't gone there.
But if you were entering into a multi-year deal and you knew what you knew, and you have all the other economic impacts that I just described, there's no way you can enter into a multi-year agreement that forces that type of cost on all of your customers, knowing that an à la carte model is effectively coming, and that would be probably better served for almost all the customers if they wanted to go there over time.
I think it's important also just to reinforce the amount of overlapping content that exists on the direct-to-consumer apps. If you look at Disney+, and if you look at Hulu SVOD, compared to the Disney Channel and general entertainment channels, there's a lot of overlap. They've also siphoned content away from those linear TV channels into those direct-to-consumer apps, which are very similar by nature.
Yep.
Yep. Thank you. All fair points.
Thanks, Ben.
Thanks, Ben. Luke, we'll take our next question, please.
Our next question will come from Philip Cusick with JP Morgan. You may unmute your line.
Hi, guys. Thank you. Two quick ones. Well, do you plan to... I wasn't sure what you said, Chris. Will you immediately pass through the savings from the Disney affiliate fee, decline to customer bills, or do you plan to credit people as they call? And then second, do you still find it a goal to add more broadband customers this year than last? Thank you very much.
Right. So we just, you know, Disney pulled its signals last night. We were disappointed that we got there. We're still developing the plan to, you know, how to go about making sure that we treat customers appropriately with credits over time. And so as we have more information on that, we'll announce it. But just know that we're gonna do what's not only required, but what's fair to our customers over time. The second question is related to our goals. Our goal is still to have higher internet net adds this year relative to last year. That's at this point in time, you know, clearly, you know, how this moves about, how it changes over time could impact that.
I don't think that'll be the case, but so as we sit here today, our, you know, goals of having higher internet net gains versus last year remains.
Thanks, Chris.
Thanks, Phil.
Thanks, Phil. Luke, we'll take our next question, please.
Our next question comes from Jonathan Chaplin with New Street Research. Your line is now open.
Thanks. It's a remedial question for Jessica, since I haven't sort of managed through a content dispute like this, for you guys before. Is a way to think about it that the you'll have a reduction in content costs of $2.2 billion and a reduction in revenues that's equal. The only net reduction in revenue would be what you lose in advertising revenue, leaving aside whatever the impact is on subscriber trends, on broadband subscriber trends.
So, Jonathan, I don't think so, and it's because the amount of revenue that you lose is really based on how many customers actually cancel the service, as well as-
Yes.
...any credit or other price adjustments that you would give. So clearly, all of the programming expense related to Disney comes out. But on the revenue side, you have both impacts to your number of customers and impacts to what-
Yes
...you're charging on a customer-by-customer basis. You're quite right that advertising revenue also could be impacted, though, I think that for the advertising that we sell on the Disney networks today, a fair amount of that advertising revenue would just get shifted to other advertising avails on other networks, and wouldn't necessarily come totally out of the system. And then the other place to think about it is in the other costs, sort of, the other costs that you incur to support customers, right? So you might-
Yes
... have some costs related to the calls that you're taking in as part of the dispute itself. But overall-
Yeah
...the number of customers that you're supporting with cost to serve, and the sales and marketing expense related to selling content to new customers also would come down as part of the way we sort of think about the overall impact of the video business.
Jonathan, if you take even a longer-term picture, today, the overall packaging and pricing of video is burdened by, you know, ESPN and all the other Disney content for customers that aren't viewing it. And so I wouldn't confuse what we need to do in a short-term environment as it relates to credits versus how a new video product would be packaged and priced in the future in an unburdened way, in a way that creates flexibility, you know, lower prices. But, you know, maybe it, you know, should be actually a more healthy margin business on the increment for those customers where it's valuable, and then you add in all these other ways that you can package around it with DTC and other places.
I mean, you could have, you know, a smaller but much more attractive business and allow customers that have an interest in that heavier content to be able to go find it elsewhere.
Yeah.
I think that's a real viable path, you know, for us.
One quick follow-up for you, Chris, just on sort of the strategy behind all of this. So my sense is, in the old days, when carriage disputes happened like this, there'd be a standoff for a few weeks, and then they would get resolved. But more recently, it seems like when content goes dark, you know, it often that's the end of the relationship, it doesn't come back. We've never—I've never seen this happen with Disney content, though. Does that make it different from the trend, do you think? Do you think the sort of the most likely scenario is that you're sort of moving on without Disney, or does the fact that it's Disney content make it, you know, this is something that has to be resolved. It's just, it'll just take time.
There's a lot in that question.
Yeah.
You know, and of anything of scale, in my entire time here at Charter, we've never gone dark. We've never had signals pulled, and certainly nothing of this size. So it's not something that we came to lightly in terms of not agreeing to what we thought were untenable proposals from Disney. Our goal still remains to go get something that works for customers, works for Disney, works for the broader programming community, and works for us. But if that's gonna happen, it has to happen very quick, because I think, as Jessica mentioned in some of her prepared remarks, that the more time that goes on, we're gonna help those bundled video and connectivity customers find a new home for their video product, preserve the connectivity relationship.
And as that takes place, the likelihood that we're gonna be willing to foist those high costs on average, an even lesser viewed population of Disney content goes down. And so our likelihood of being willing to go do a deal decreases over time as those downgrades to video occur, and our likelihood of heading into a moving on scenario with, you know, completely different video product structure that I described goes up significantly. So our goal is to try to resolve this fast, but as more time goes on, I think that that argues for the other scenario.
Got it. Thanks, guys. I appreciate it.
Yep.
Thanks, Jonathan. We'll take our last question, please, Luke.
Our last question will come from Vijay Jayant with Evercore ISI. Your line is now open.
Hey, good morning. This is Kutg un Maral on for Vijay. Thanks for taking the questions. Two, if I could. First, Chris, I know you said that you won't get into potential deal terms, but I have to ask, you know, what can you share on what you envision would be the economics in this new model, where you'd bundle Disney's ad-supported streaming apps into your packaged linear products? Presumably, you're looking for some sort of revenue share on both advertising and subscription, as well as low wholesaler rates to offer these products to your customers. But any detail you can share would be much appreciated for us to understand this new potential industry structure. And second, can you talk a little bit more about what moving on from video fully entails?
Does this mean potentially not inking a Disney deal without a more transformational component, or is it more about leaning on alternate video solutions like Xumo, while maybe passing on through more of these costs to consumers than you have historically? I'm just trying to better understand how far you're willing to go. Thank you.
Yeah. On your second question, the answer is yes to both of those. It would be moving on without Disney content permanently, and it'd be looking to our existing distribution platforms of Roku, Apple TV, and then eventually Xumo, to be able to create new packages for general entertainment with more flexibility and the ability for consumers to add on à la carte, direct-to-consumer packages, as they see fit. Your first question, you know, we're, we're not gonna get into, you know, any specific deal economics, but I can answer what you asked pretty, pretty simply, which is, for our existing expanded basic customers who pay for the broad package of Disney and ESPN content, the construct is that they would receive the associated direct-to-consumer apps for free inside of their package.
There would be no additional revenue share to us, and there would be no additional cost to us or the consumer. As it relates to what we've committed to market as part of the deal that we proposed to our broadband customers, of course, you'd end up with a revenue share there. But we would have, you know, a real commitment to go market, and I think it'd be powerful to our broadband-only customers, you know, individual or packages of DTC content, which for us is an alternative video model.
And so when I talk about a glide path for Disney, which clears the way for ESPN to go direct to consumer in a way that's friendly and doesn't completely cannibalize their larger linear video revenues that they have, it also works for us because it creates a glide path for us to create new marketing channels for, you know, new types of video products. And, and the reality is that you'll have customers who are living in both worlds, and this creates that type of environment where you have a really elegant glide path for, you know, all the different parties. And you have economic incentives that are aligned for the first time in a really long time, and that's, that's what we've been missing.
That's what this creates, and it creates, you know, not only alignment between the distributors and the programmers, but it creates a more valuable product for consumers, you know, that actually makes quite a bit of sense in terms of how they use the products.
Understood.
Go ahead.
Thank you so much.
With that, we'll wrap it up. And, again, I'll finish where we started, which is we're sorry for the short notice for the call. This wasn't something that we planned or expected. We know the timing's not great. I sincerely apologize to anybody on the call who is a video customer of Charter. We've never had this take place before, and it wasn't our intent, and we're doing this as a way to try to ultimately help customers long term. So thank you very much.
Thanks, everyone. Luke, that concludes our call.