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SEC Filings

10-Q
CHARTER COMMUNICATIONS, INC. /MO/ filed this Form 10-Q on 10/26/2017
Entire Document
 


Programming costs were approximately $2.7 billion and $2.4 billion, representing 40% and 37% of total operating costs and expenses for the three months ended September 30, 2017 and 2016, respectively, and $8.0 billion and $4.6 billion, representing 40% and 38% of total operating costs and expenses for the nine months ended September 30, 2017 and 2016, respectively. The increase in operating costs and expenses for the three and nine months ended September 30, 2017 compared to the corresponding prior period was primarily due to an increase in programming costs and the Transactions.

The change in other expense is attributable to the following (dollars in millions):

 
Three months ended
September 30, 2017
compared to
three months ended
September 30, 2016
Increase / (Decrease)
 
Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Corporate costs
$
(35
)
 
$
225

Enterprise
4

 
240

Advertising sales expense
12

 
245

Property tax and insurance
1

 
115

Stock compensation expense
(17
)
 
30

Other
2

 
102

 
$
(33
)
 
$
957


The increase in other expense for the nine months ended September 30, 2017 compared to the corresponding prior period was primarily due to the Transactions.

On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, increases in our operating costs and expenses, exclusive of items shown separately in the consolidated statements of operations, are attributable to the following (dollars in millions):

 
Nine months ended
September 30, 2017
compared to
nine months ended
September 30, 2016
Increase / (Decrease)
Programming
$
724

Regulatory, connectivity and produced content
(17
)
Costs to service customers
(135
)
Marketing
8

Transition costs
26

Other
(105
)
 
$
501


On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, programming costs were approximately $7.2 billion, representing 37% of total operating costs and expenses for the nine months ended September 30, 2016.

Programming costs consist primarily of costs paid to programmers for basic, digital, premium, video on demand, and pay-per-view programming. The increase in programming costs for the three months ended September 30, 2017 and nine months ended September 30, 2017, on a pro forma basis assuming the Transactions occurred as of January 1, 2015, compared to the corresponding periods in 2016 is primarily a result of contractual rate adjustments, including renewals and increases in amounts paid for retransmission consents, higher expanded basic package customers and higher pay-per-view events offset by synergies as a result of the Transactions.  We expect programming expenses will continue to increase due to a variety of factors, including annual increases imposed by programmers with additional selling power as a result of media consolidation, increased demands by owners of broadcast stations for payment for retransmission consent or linking carriage of other services to retransmission consent, and additional programming, particularly new services. We have been unable to fully pass these increases on to our customers nor do we expect to be able to do so in the future without a potential loss of customers.


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