The Shifting Pay TV Industry

[spuwho]

Per Gigaom:

http://gigaom.com/2013/11/15/the-shifting-pay-tv-industry-in-two-charts/

More than half of consumers with a connected TV have increased their use of over-the-top broadband TV sources in the last year, with 24 percent reporting a sizable increase according to data from the TDG Group. This television includes sources like Netflix, YouTube and Hulu, and the group's research notes that this isn't necessarily good news for the pay TV companies that are seeing subscriptions decline.

From the release announcing the study:

    "That consumers are watching more over-the-top video is not itself surprising," notes Michael Greeson, co-founder of TDG. "But to see such a widespread increase in OTT TV viewing is dramatic, especially as pay-TV subscriptions in the US are experiencing their greatest 12-month losses to date."




Meanwhile, with the rise in consumption of internet TV there's a decline in pay TV subscribers. This is the third consecutive quarter of such quarter-over-quarter declines according to investment bank Stifel Nicolas, which notes that the economy is improving and people are building houses again. Growth in housing is generally correlated to growth in cable subscriptions.



So while a whopping 86.8 percent U.S. homes have cable, they are also spending more time enjoying internet services, which may lead more to question the value of paying high cable fees. However, if cable companies can take what consumers enjoy from such over-the-top services like on-demand programming to any device and still keep a lock on quality programming they have an enviable hunk of the market.

[Dapperdan]

We just need that first network to break the old mold. They are afraid to do it. ESPN being the biggest offender. Most people have cable because of ESPN. If ESPN offered its services for say 3.99 or 4.99 per month so that you could view their programming on any set device that will allow it, then the mass exodus would only increase further.

Pay TV abused its clients for far too long and thought they could get away with it forever. They thought they could be like Disney World and just steadily increase the rate you pay every year without the consumers noticing or complaining. Wrong. The minute we see something else that works, we all run for it. Yes, I miss the few channels I enjoyed, but I do not miss paying over $100 a month for a handful of channels and the rest garbage. I dropped the cable long ago, and suggest you do the same. They will be forced to either adapt or disappear like Blockbuster. Its kind of funny the same company, Netflix, shares a part of the demise of Blockbuster and now is putting the pressure on Pay TV as well.

The only bad thing is most cable companies rule the internet Broadband market as well, and they could start putting the squeeze on high data users who are most likely using Netflix, Hulu, etc. Hopefully the paradigm  is about to shift and we are on the edge of it.

[Lunican]

Over the past 10 years I've saved about $12,000 just by avoiding cable.

[fsquid]

If I didn't love sports so much, I probably would have done the same.

[Dog Walker]

We also dropped cable TV a couple of years ago, put up an outside antenna, got an internet connected DVD for Netflix, YouTube, etc and would never go back to a cable TV bundle.

[carpnter]

If I didn't love sports so much, I probably would have done the same.

Yeah, I watch sports quite a bit, especially during college football.  I just don't have any desire to have subscriptions to multiple services (Netflix, Hulu, etc...) to be able to watch all the programs I am interested in. 

[Lunican]

Cord Cutters and the Death of TV.

http://www.businessinsider.com/cord-cutters-and-the-death-of-tv-2013-11

[Dog Walker]

And there is talk of Comcast acquiring Time Warner Cable.  Sign of a desperate industry?

[mbwright]

If the price was reasonable, and the service good, I think many would continue their cable.

[KenFSU]

We just need that first network to break the old mold. They are afraid to do it. ESPN being the biggest offender. Most people have cable because of ESPN. If ESPN offered its services for say 3.99 or 4.99 per month so that you could view their programming on any set device that will allow it, then the mass exodus would only increase further.

With the amount of money that ESPN pays for its major sports contracts, I don't know if this is necessarily possible. Nor would it be possible as a $5 cable add-on. The problem is, ESPN already gets a $5 cut from every single cable and satellite subscriber (~80% of Americans), regardless of whether or not they ever turn the network on. If television moved to an a la carte pricing scheme, where you only pay for the channels that you want, you will no longer have the rest of the cable universe subsidizing your favorite networks. I would suspect that consumers would actually end up paying the same, if not more, for fewer networks. $15 a month for ESPN. $20 for HBO or Showtime. $8 a month for your AMC, USA, or Spike. $5 for your E!, Bravo, or Food Network. Plus, decreased eyeballs equals decreased ad revenue which has to eventually lead to increased prices for consumers as well.

I think the current cable television model is terrible and anti-competitive, but long term, I don't necessarily see cord cutting costing consumers any less out of pocket.

[spuwho]

Right now the carriage costs are buried in with the programming costs. So it becomes impossible to compare effectively with other offerings.

Everyone offers hundreds of channels, but it has reached saturation with consumers, who have lost interest in volume as a choosing point.

If cable showed bills like the power utilities did, which breaks out the cost to deliver, the costs of fuel and regulatory charges, etc. then people would have a basis by which to build an 'a la carte' model. But this would reveal some competitive data that they don't want to share.

But on the flip side ESPN has incredible leverage and demands (and gets) very onerous "must carry" provisions in their agreements.  On one side sports is a huge money maker since it attracts a dedicated crowd, but the large amounts of inflation involved in paying larger contracts to the sports entities (like NFL, NBA, MLB) is causing pressure. Recent cable startups like NBCSports and Fox1 are going to attempt to walk into ESPN's shoes, that is how much money is floating around.

One of the issues that cable never addressed up front is the fact that the original selling point of it was the fact that since you pay carriage costs, it didn't need commercials to support the delivery of a channel like OTA TV did. But sports TV broke that model by demanding more $ per sub AND adding more commercials to the programming. They used this revenue to outbid for league packages.

This is driving people to unplug or ask for 'a la carte' even harder. To this day in most of the country you can't get a cable package without ESPN. Disney (ESPN owners) wants to keep it that way.

[AmyLynne]

Right now the carriage costs are buried in with the programming costs. So it becomes impossible to compare effectively with other offerings.

Everyone offers hundreds of channels, but it has reached saturation with consumers, who have lost interest in volume as a choosing point.

If cable showed bills like the power utilities did, which breaks out the cost to deliver, the costs of fuel and regulatory charges, etc. then people would have a basis by which to build an 'a la carte' model. But this would reveal some competitive data that they don't want to share.

But on the flip side ESPN has incredible leverage and demands (and gets) very onerous "must carry" provisions in their agreements.  On one side sports is a huge money maker since it attracts a dedicated crowd, but the large amounts of inflation involved in paying larger contracts to the sports entities (like NFL, NBA, MLB) is causing pressure. Recent cable startups like NBCSports and Fox1 are going to attempt to walk into ESPN's shoes, that is how much money is floating around.

One of the issues that cable never addressed up front is the fact that the original selling point of it was the fact that since you pay carriage costs, it didn't need commercials to support the delivery of a channel like OTA TV did. But sports TV broke that model by demanding more $ per sub AND adding more commercials to the programming. They used this revenue to outbid for league packages.

This is driving people to unplug or ask for 'a la carte' even harder. To this day in most of the country you can't get a cable package without ESPN. Disney (ESPN owners) wants to keep it that way.

That has always pissed me off...paying for the privilege to watch commercials!!