The average person is paying more than ever for cable or satellite.
Cable and satellite TV companies are unpopular for good reason. Monthly charges are as high as a car payment with package deals requiring that we pay for a glut of channels we never watch. On top of that, cable customer service gets some of the lowest ratings of any industry. This is why an increasing number of people are contemplating cutting their cable in favor of selected Internet-based network transmission, e.g., Netflix, Hulu, etc. However, this switch is happening at a slower pace than you might imagine. In fact, the attrition rate for cable is still only about 1% a year. So far, TV viewers are simply adding Netflix and other subscription services as add-ons to their cable and therefore paying more than ever for TV.
Tv cable and internet service provider options
In 2000, people watched analog TV via broadcast or cable signals. If you had internet service, you got it via your landline. With digital transmission, we are now accustomed to getting bundled TV, cable, and auxiliary wi-fi reception for all our screen devices. This includes much-improved fiber optic bandwidth with greatly improved picture resolution.
Unfortunately, we’re experiencing a glacial launch of 4K digital transmission (a revolutionary improvement over now standard 1080p) despite the fact that most higher-end new TVs are 4K ready. This is less a problem for satellite ISPs than for cable providers because with cable there are limits on bandwidth. The main reason for this impediment is that major networks require that cable TV providers take what they give them. Adding 4K transmission is a tight fit because each network demands a hefty amount of bandwidth to accommodate their analog and unpopular auxiliary channel transmission.
Cutting the cord
I have friends who ‘cut the cord’ several years ago and are happy with their TV viewing options. In fact, for those who don’t watch much TV, including many Millennials, this is a great choice. After all, streaming video now constitutes more than two-thirds of all internet traffic and many video snippets from popular shows are free to view online. Yet when cord cutters add HBO, Netflix and other individual pay-to-view options, the cost of those subscriptions quickly adds up.
While an increasing number of cable subscribers are looking for ways to jump ship, assembling a subscription-based array of channels requires a consumer to manage three or more different providers for service installation, billing and maintenance.
Cable TV present advantages over streaming video services
Cable continues to offer important competitive advantages:
- It still provides the greatest the depth and range of entertainment content.
- Despite the high cost, most consumers prefer the convenience of packages combining broadband, television and telephone service.
- Cable networks are keenly aware of how Apple’s iTunes upended the music industry. They are too powerful to allow the ‘Spotifying’ of TV without an epic fight. Together, they will present a formidable, unified front against next-generation Internet Service Providers (ISPs).
- Older Americans watch more TV than any other demographic group. They are more than willing to pay for the wide range of cable choices on advanced cable platforms like Comcast’s Xfinity. In addition, they are much less likely to be early adopters than younger consumers. –In short, cable is not going away anytime soon.
Technology advantages are beginning to level the playing field
It all began with the great popularity of YouTube, now available as a paid subscription service, YouTubeRed, since last year. According to one projection, 80-90% of all internet traffic will be from video by 2019.
The following tech advancements are preparing the stage for an epic political battle between cable and ISPs likely to play out in the courts in the 2020s–
- Bandwidth consumption has increased 50-fold in the past decade. Growth in capacity will continue as server hardware and other costs decline. Some argue, however, that we will reach bandwidth capacity by 2020. I will explore this possibility in a future Insights article.
- Streaming TV series like Netflix’s critically acclaimed “House of Cards” and Amazon’s “Transparent” have been big hits. As a result, Over the Top (aka OTT) providers like these two companies are spending billions of dollars a year on exclusive subscription content. They are also providing 4K transmission well ahead of their cable competitors.
- As mobile device video streaming grows, ‘linear viewing’ will decrease. Millennials and others pressed for time are spurring this trend of watching what they want, when they want.
- Connectivity is exploding, for good and bad. Our digital devices give us immediate access to limitless life-enhancing communication and entertainment from around the world. Unfortunately, internet video has also been the single greatest catalyst for spreading the deadly virus of international terrorism.
Lets talk about Internet Cable
Though cable TV in one form or another is here to stay, younger consumers’ switch to streaming video is giving rise to a growing number of bundled and individual subscription entertainment options. For example, Dish is among companies that have been offering so-called ‘skinny bundles’ to this rising demographic.
A high-stakes contest is only now beginning among major entertainment conglomerates and ISPs for long-term competitive advantage/profit. –Most analysts predict a period of deconstruction will morph into an eventual ‘rebundling‘ of TV transmission across yet-to-be-developed internet platforms. But whether cable or ISPs will have the upper hand in that equation probably won’t be decided in the courts for many years. —A list of forces on both sides of the issue is at the end of this Insights installment.
A greater range of offerings
Newer ‘over-the-top’ (OTT) streaming platforms include HBO, Showtime/Starz and other premium choices. Within the coming year, Amazon and YouTube (owned by Google) and Hulu (Disney, Fox and NBC Universal) are planning to offer expanded live TV packages via OTT transmission. The expected price for these bundles will be in the range of $40-$50 a month, about half the current average cost of Cable. These larger OTT services will record and store program options using new cloud-based DVR technology.
In the short term, media companies with less popular programming like Viacom will fall behind. Other losers will be low-audience independent channels now bundled with cable and satellite packages.The winners will be media companies that offer popular standard and premium networks without the typical glut of ‘junk’ channels. –In that mix, cable firms are already crossing the boundary from cable into streaming TV content.
Among the downsides of OTT services has been a lower quality of transmission than with cable. Also, for example., NBC Universal is owned by Comcast, creating uncertainty about the Hulu’s planned new offering later this year in the years ahead.
The new packages will cost more overtime
Entertainment analysts predict that the current, highly unpopular cable convenience charges will reemerge with these new, larger OTT bundles. This should come as no surprise because today’s OTT services require multiple installations, multiple logins and coping with multiple customer service departments. Many, perhaps most consumers will be willing to pay to avoid this hassle.
The big picture
It’s important to understand that different economic and political forces have organized into two competing camps–one fighting to give ISPs greater control over TV transmission, the other fighting to give cable companies a continued monopoly.
Proponent of ISP OTT TV Transmission
- Name of Alliance–Consumer Video Choice
- Corporate Supporters–Google, Netflix, TiVo, Amazon, Netflix, Vizio, AOL, Microsoft, Yahoo
- Nonprofit Supporters — Consumer Action, New America Foundation, Public Knowledge
- Political supporters–Mixed; only now beginning to coalesce
Defenders of Cable Industry Monopoly
- Name of Alliance–TheFutureOfTV
- Corporate Supporters– Comcast, AT&T, Charter, Dish, Time Warner Cable, Vme Media + most other cable companies and equipment manufacturers
- Nonprofits/Political Action Committees include– The Motion Picture Association of America + numerous Hispanic and Black alliances.
- Political supporters–Mixed; only now beginning to coalesce