1 in 8 cable/sat subscribers will drop service. maybe they shouldn't charge 70 bucks

[FastNOC]

Interesting article on CNN money (http://money.cnn.com/2010/04/30/technology/dropping_cable_tv/index.htm). the sad part is, this will not help, it will hurt, and the companies will be charging more, not less, and it's not good.

NEW YORK (CNNMoney.com) -- Despite rising cable and satellite TV prices and easy access to streaming TV and movies on the Internet, few consumers have cut the cord. But that looks like it's about to change.

One in eight consumers will eliminate or scale back their cable, satellite or other pay-TV service this year, according to a new study released this week by Yankee Group.

...


<Moderator note: Remainder of the article was removed to protect the rights of original source. The whole article can be found at the link above. (tom)>

[phrelin]

The critical line here is "Get ready to pay for online TV." The reality of life is there are no free lunches. What has been happening is the equivalent of cable/satellite cheap new-subscriber offers.

Folks will end up paying one way or another. HULU has been talking publicly for months about become "pay TV" either on a pay-per-view or monthly membership basis like Netflix only with ads.

At some point people may end up with a mix of off-the-air, cable/satellite, and internet TV, but they'll pay the cost of media production and distribution.

[FastNOC]

agreed, and the free ride of the ROKU at netflix will change too. the whole business is changing. the free online streaming (or very low cost) is going to change.

[scooper]

Well personally - I've cut out DVR and dropped back to AT120 on a single receiver (old Legacy 4900 that was my original Dish receiver) for right now.... although I may need to change to an MPEG4 and Eastern Arc to keep service in the next year or 2.

[brant]

agreed, and the free ride of the ROKU at netflix will change too. the whole business is changing. the free online streaming (or very low cost) is going to change.

netflix streaming w/ a roku is not free.


we cut dish network over a year ago, and now use OTA and streaming netflix through WMC; unlimited streaming is $8.99/mo.

[FastNOC]

no it's not free, it's 3 bucks a month i believe which is about the same. the point is, watching unlimited movies for NEXT TO nothing is not going to last.

semantics...

[BattleZone]

Exactly. Internet delivery of TV is still fairly new, but the more popular it becomes, and the more it erodes traditional revenue streams, the more the content-holders will find ways to make money from their Internet streaming.

Folks that think that free or ultra-cheap TV via the Internet is here forever are going to be in for a rude awakening soon.

[dubber deux]

I been saying this for over a year now..

The bottom line is that the average "joe" simply can't afford the outrageous rates they are charging for mostly crappy programming with huge amounts of dupication among channels with will over 20 minutes of ad spots for a typical one hour program.

I'll be reducing my spending on D* after the promotional rate is finished !

[BattleZone]

The bottom line is that the average "joe" simply can't afford the outrageous rates they are charging for mostly crappy programming with huge amounts of dupication among channels with will over 20 minutes of ad spots for a typical one hour program.

Given DirecTV's 18 million customers, and Dish's 14 million customers, I'd have to disagree. It's quite clear that the "Average Joe" can indeed afford to pay for TV, and does.

And for a whole lot of people, what is available OTA or via Hulu isn't enough to satisfy them at any price. And while OTA will be "free", Hulu and other Internet delivery simply isn't going to be free for much longer, and was never intended to be free forever. It was only free long enough to get people used to using it, so that it would be easier to charge for that content eventually.

[dubber deux]

The only way D* and E* have been able to keep folks signing up is the use of "teaser" promotional rates that require a two year contract. What I have noticed is that once the first initial "cheap" year is over and the higher price comes into effect during the second is how many folks start to choke at the reality of the higher price and immediately tend to drop to a lower level of program packages....I don't think that most folks will totally drop a pay tv service but more likely drop to lower cost packages, substantially lower price packages....I wouldn't doubt that quite a few cable subs will downgrade to "basic". Which essentially only provides OTA channels a few sub channels and maybe C SPAN and a few others...yep family budgets are THAT tight!

[JackDW001]

Go back 20 or so years. The early adopters if Satellite (the old C-Band BUD) were in the same boat. Everything off the Satellite was free and unscrambled. As the number of users grew, it gained the attention of the broadcasters and eventually everything became scrambled and required subscriptions. This eventually grew into the DBS systems of today.

Same thing will happen here. Eventually the broadcaster (with the help of Washington) will setup a distribution network and a subscription method. Enjoy it while you can. This will not last long.

[BattleZone]

I don't think that most folks will totally drop a pay tv service but more likely drop to lower cost packages, substantially lower price packages....I wouldn't doubt that quite a few cable subs will downgrade to "basic". Which essentially only provides OTA channels a few sub channels and maybe C SPAN and a few others...yep family budgets are THAT tight!

Since I'm in 50-75 homes per month on average, I can see the trends. It's true that many "middle class" homes have lowered their base subscriptions, almost certainly as a result of the economy, but more and more homes have 6+ TVs installed, whereas 5 years ago, 2-3 was the norm. And I continue to be amazed at how many people have found the money to buy 3-4 good-size (40+ ") HDTVs.

So, while there may be a bit of a shift, it's clear that TV is more important than ever to most people, and more people are adding programming in more locations than ever before. I expect that as the economy improves, many folks will start upping their subscriptions again, and the sat companies have made that VERY easy to do. I wouldn't worry too much about Internet TV stealing subscribers... YET.

[FTA Michael]

No offense, BZ, but you don't go into homes that have just OTA, do you? Me, I see two trends:

1) A growing, possibly stabilizing minority of households who don't subscribe to cable or satellite. They're OTA-only, often supplemented with NetFlix or internet-based TV. Instead of being characterized as luddites or whackos, now they're just frugal. Or smart. ;)

2) A growing movement in the coming wireless spectrum wars to declare that "pretty much everybody" uses something besides OTA to get TV. Some trial balloons include providing free basic cable (!) to the holdouts who stubbornly cling to broadcast TV.

I don't know who's going to win, but it sure feels like there's a change coming.

[FastNOC]

No offense, BZ, but you don't go into homes that have just OTA, do you? Me, I see two trends:

1) A growing, possibly stabilizing minority of households who don't subscribe to cable or satellite. They're OTA-only, often supplemented with NetFlix or internet-based TV. Instead of being characterized as luddites or whackos, now they're just frugal. Or smart. ;)

2) A growing movement in the coming wireless spectrum wars to declare that "pretty much everybody" uses something besides OTA to get TV. Some trial balloons include providing free basic cable (!) to the holdouts who stubbornly cling to broadcast TV.

I don't know who's going to win, but it sure feels like there's a change coming.

You know, the interesting thing here is the options that are available.

Now, this isn't a legit solution, but it does show the trends changing. A friend of mine lost his job. He had cable. So he cancelled his cable, dropping his monthly 100+. He had an OTA HD antenna, and watches every show we see on network tv by downloading the episodes on newsgroups, and watching everyong on his 65 inch with his HTPC.

Not only is he able to download the shows, the commercials of course are all cut out and it's high quality HD.

He said he doesn't miss having cable a bit. which I can understand. I don't watch shows when they air, and I have dish. i DVR everything so i can skip commercials.

So, while that's not a legit solution, it does show how easy it is to get all the shows you can get on HD through a sat/cable provider. not only that, but he has netflix at 9 bucks a month and streams movies through his roku (i have one and I love it). So he's not only watching everything that's on network tv, he pretty much has access to all the movies that are on the premium channels too. in HD. And not only that, but ROKU now does PPV events. Like the UFC. As well as movies like avatar. so there isn't much being missed there either.

You're right about the times changing. 5 years ago if you said you could dump cable/sat and not miss any shows, i'd have laughed.

[rid0617]

I cut directv after 15 years. One of the original subscribers. Had 2 receivers go out over the years, no problem, bought another one and called the company. But 5 months ago it was time to buy another receiver. Went to Best Buy but was told I had to sign a 2 year contract. No way.

Called directv and even after 15 years they told me to activate my new receiver I would need to sign a new contract. I told the woman you keep me by satisfaction, not obligation. Canceled the service. They offered me free movie channels if I would stay. Told her why bother, I still don't have a receiver that works.

They did me the biggest favor I could imagine. Went with OTA digital and netflix DVDs. That $70+ dollars a month has never looked better in my pocket.

[hdtvfan0001]

Since pricing is often based on revenue - cost.... ;)

Lower subscriber numbers will likely translate into higher prices for the remaining subscribers.

Maybe one sign of evidence is Dish's recent price hike, despite removing several Disney HD channels.

I suspect margin- per-customer are narrow...so this is certainly a legitimate issue/concern.

[Jtaylor1]

If that keeps up, people will start living a life without TV, the Internet, or any other things that involves with technology.

[lee635]

I think another trend is the dvd rental kiosks at grocery stores and other places. Movies rent for $1. You don't need to be a techie or anything to rent a dvd. So you can pay $15 a month for HBO and maybe see 8 or 10 movies and shows that you may or may not really want to see....or rent 15 movies that you actually want to see.

[pfp]

Lower subscriber numbers will likely translate into higher prices for the remaining subscribers.


which will result in even more subscribers canceling due to price.

which will lead to higher prices

...

[ClearSKY]

I don't understand why anybody would pay upwards of $100 a month for tv, everything is so widely available on the internet, and now with the iptv services coming around its getting easy to take the internet content to your tv.

[Stewart Vernon]

I don't understand why anybody would pay upwards of $100 a month for tv, everything is so widely available on the internet, and now with the iptv services coming around its getting easy to take the internet content to your tv.

Not quite as clear cut as that.

Assuming for a moment that all the content you want to watch is available in high quality streaming/downloadable content online... you still have to pay for an unlimited broadband high-speed connection to get it... and while you're doing that downloading it takes away from your other internet speed usage... and you certainly can't have a multi-tuner scenario going on like you can with satellite/cable where you are simultaneously getting 4 or more simultaneous HD programs in real-time.

I have an 18Mbps connection download that costs around $60 per month. I also have 3 Dish receivers, on each receiver I can record at least 3 programs at the same time (4 at once on my 922)... but at best I could get 2 simultaneous streams from my internet connection.

[fluffybear]

Mrs. Fluffybear recently asked about cutting out a couple of receivers. We have 3 receivers that we could get rid of if we really wanted. At $5.00 per receiver, A $180 a year is nothing to sneeze at.

[Shades228]

ISP's are a huge profit margin and they will only continue to become more profitable until something really rocks the current business model. If you don't think that they're watching the impact of the mobile providers starting to have caps and overages with internet usage then you're either not paying attention or kidding yourself.

Also once re-broadcasters lose revenue they will then start paying less for the product or no longer carry it. So far only online gaming has proven a viable and profitable business model as far as monthly costs go. We're still many years away from IPTV being equivalent, legally at least, to any provider now.

[lee635]

I don't know about that Shades, with netflix streaming, I can get a whole library of movies, tv programming, etc. And netflix is still relatively new to the streaming scene. I think even if they went up to $1 per movie for recent releases, folks would still enjoy the convenience. Then, Netflix could still allow all-u-can-eat for older movies and shows.

As for the potential bandwidth problems, lots of streaming likely won't be a problem for the backbone. Outfits like netflix can place a server with lots of bandwidth in every big city, so that the feeds aren't having to travel across country. That leaves the bottleneck at the dsl and cable headend. The small percentage of households with fiber won't be adversely impacted. Just my thoughts...

[Mark Holtz]

See http://www.dbstalk.com/showthread.php?t=183159 . Same thing.

DirecTV has me until January, 2012. After that, I may end up cutting the service. The only reason why I'm keeping it now is because of my mother, and even she is watching less.

It may take some mass unsubscriptions to convince the programmers to rethink their model of "everyone must subscribe, even if they don't give a...". Part of my bill includes the $ports networks. I don't watch $ports, either E$PN or the Regional $ports Networks. Yet, I still have to pay, along with the so-called music channels. Why am I singling out the $ports channels? Because they are the most expensive per-subscriber channels in the basic packages.

[bills976]

They will definitely start charging for online access, but I don't know how they are going to stop the piracy problem. "Wild" internet feeds with NFL games, broadcast networks, etc, are all commonplace on the web if you know where to look. And given that many of the people originating these feeds are in countries like Russia and Sweden, I don't know how they will legally be able to take them down. People are willing to pay for Netflix, etc because it's cheap. If it becomes more expensive... well, look for people to start to take advantage of piracy. It's an interesting shift in the model and it will be even more interesting to watch what companies decide to do about it.

[brant]

I don't know about that Shades, with netflix streaming, I can get a whole library of movies, tv programming, etc. And netflix is still relatively new to the streaming scene. I think even if they went up to $1 per movie for recent releases, folks would still enjoy the convenience. Then, Netflix could still allow all-u-can-eat for older movies and shows.

...

I would not be willing to pay $1 per movie or tv show.

If we had to pay that in my house watching two programs a day, might as well go back to satellite or cable.

[Stewart Vernon]

I would not be willing to pay $1 per movie or tv show.

If we had to pay that in my house watching two programs a day, might as well go back to satellite or cable.

Yeah, that's one aspect of the model no one really thinks about.

It's fine to pay $1 every now and then for something... but if you actually had to pay $1 for every movie you watched or every TV show... you'd very quickly go past what you're paying now to have an "Everything" package on cable or satellite.

Consider... if you're paying $100 per month for satellite, that would be about $3.28 per day for a buffet of viewing options 24 hours a day.

[Gloria_Chavez]

Stewart, consider this...

Since 1995 the average cable bill has increased 122%

http://www.multichannel.com/article/196364-Study_Average_Cable_TV_Bill_Is_71_Per_Month.php

And the Average TV Viewing by Household has increased by 13%

http://blog.nielsen.com/nielsenwire/media_entertainment/average-tv-viewing-for-2008-09-tv-season-at-all-time-high/

That's the problem.

You're paying significantly more per hour of TV viewing.

Frankly, I'm surprised that the DirecTV and Comcasts have given in so easily to the demands of ESPN and other sports channels.

If they're not careful, they're going to lose everyone but the sports fanatic, who will be paying more and more to get their daily fix.

[Stewart Vernon]

Stewart, consider this...

Since 1995 the average cable bill has increased 122%

http://www.multichannel.com/article/196364-Study_Average_Cable_TV_Bill_Is_71_Per_Month.php

And the Average TV Viewing by Household has increased by 13%

http://blog.nielsen.com/nielsenwire/media_entertainment/average-tv-viewing-for-2008-09-tv-season-at-all-time-high/

That's the problem.

You're paying significantly more per hour of TV viewing.

Frankly, I'm surprised that the DirecTV and Comcasts have given in so easily to the demands of ESPN and other sports channels.

If they're not careful, they're going to lose everyone but the sports fanatic, who will be paying more and more to get their daily fix.

While that might be true... it still doesn't refute the points brought out above that the pay-per-view model isn't going to save anyone money.

IF people truly had to pay per episode of TV watched... most people would find their bills skyrocket for less viewing options.

People that just watch one or two TV shows a season and not many movies would save, of course, but those folks aren't paying for anything but basic packages anyway!

The people who really love TV and movies are subscribing to higher tiers and paying more, to be sure... BUT they'd pay even more if they had to pay for each individual episode or movie they watched at $1 or more a pop.

I don't disagree that TV is going up (always has) in price... and we all will have to make choices... but one choice that doesn't make sense is to adopt a pure pay-per-view model that would end up costing more.

[Gloria_Chavez]

Dave, I do believe it would save MANY people money. How many? Only the MSO and DTH providers know for sure. They know the habits of their customers, and I'm almost certain that 80% of the HHs watch but 20% of the channels. If those 20% of the channels were made available a-la-carte, and the customer's monthly bill fell by 50%, it is very possible they would do without the 80% of the channels that they only occasionally watch.

Would some have to pay more? You bet. A sports fan would probably have to pay 30 dollars a month to watch ESPN.

But the majority would pay less.

[Stewart Vernon]

Do you buy your bread by the slice? Only enough for the sandwich you are eating today?

Or do you buy a loaf at a time?

That's what we are talking about here with a la carte vs the tier model.

Tiers are creeping up in price... but a la carte would have price increases yearly too. In fact, channels ask for more money every time their contract is up today.

ESPN wouldn't be $30 a month either because it would be popular enough that the per-channel cost would be more like HBO numbers I'm sure.

Do you want Syfy to cost $10 like HBO does? OR maybe you like Hallmark for $10?

Lots of channels would go away with pure a la carte... and what would remain would have to charge more... so unless you just wanted literally 1 or 2 channels, your bill would likely be the same or higher for far fewer viewing options.

It just gets worse if you had to pay-per-view each individual program.

I'm also amazed when people like $1 per show or movie rentals/streaming purchase... but then think their SAT bill is overpriced without figuring out how many TV shows/movies they actually watch and seeing how expensive that would be on a per-view basis.

[Glen_D]

Do you buy your bread by the slice? Only enough for the sandwich you are eating today?

Or do you buy a loaf at a time?

That's what we are talking about here with a la carte vs the tier model.

I don't think so. I buy bread by the loaf, because I am going to consume the entire loaf over a period of days. I am using everything I paid for.

With pay TV services, I have to buy a package that has a bunch of channels, but I only watch a few of those channels. I am paying for a lot of channels I never watch.

Still, I'm not convinced a la carte is feasible. I think we would be more likely to see stripped-down packages, kind of like Dish Network's AT120, or DirecTV's "secret" Select package, if they want to reduce defections/grow the subscriber base.

[Gloria_Chavez]

Stewart, today, most people buy their music a-la-carte, instead of in album format, as they did prior to 2000. And people are happier with their music, and are spending far less than they did prior to 200.

[Mark Holtz]

Do you buy your bread by the slice? Only enough for the sandwich you are eating today?

Or do you buy a loaf at a time?Since you are using the bread analogy....

Would you like multigrain, wheat, white, sweet, sourdough, rye, kibbled, fruit, English muffin, hearth, French, flat, or bagels? Under the present cable system, I have to purchase all those breads for the month, even though I am only interest in sweet rolls and bagels.

[Stewart Vernon]

Stewart, today, most people buy their music a-la-carte, instead of in album format, as they did prior to 2000. And people are happier with their music, and are spending far less than they did prior to 200.

Only people who wanted just a couple of songs are saving money. Anyone who wants the entire album is paying more for less since the digital copies are not as high of quality as the CDs (or albums) were.

If you only want one song... then 99 cents for a song is cheaper than $15 for a CD... but if you want most of the songs, then you aren't saving money.

Like I said... if you only watch 1 or 2 TV shows and very few movies, then you might save money a la carte... but then you aren't watching much TV to begin with!

I watch a couple of TV shows a night most nights and at $1 per episode that'd already be $60 a month if I didn't watch anything else and didn't watch any movies... so a la carte wouldn't save me any money at all.

[Stewart Vernon]

Since you are using the bread analogy....

Would you like multigrain, wheat, white, sweet, sourdough, rye, kibbled, fruit, English muffin, hearth, French, flat, or bagels? Under the present cable system, I have to purchase all those breads for the month, even though I am only interest in sweet rolls and bagels.

The point was that a loaf of bread costs less than buying bread by the slice would cost. IF you only want a few slices then you're throwing away money buying the loaf... but if you want half or more of the loaf then you might as well buy the loaf and save money even if you end up not eating all of it.

Some who want a la carte seem to think they'd get to watch all the stuff they want to watch for pennies a show/movie... but that's not going to happen. The price-per-episode is already easy math to show you how quickly you'd pay more for just a handful of episodes than you'd pay to have the whole package of channels you don't watch.

A similar thing would happen if channels were a la carte too... People forget that we evolved to the tier model in part because in the past when customers were given the option to buy individual channels OR save money on a package deal, people were more often willing to pay for the package even if they didn't want all the channels in it.

[lee635]

Just to clarify: My original point was a $1 charge to stream new releases, not "every movie or show" you download through netflix. I think the pay-one-price for all-you-can-eat on the older stuff will stay in place.

For tv shows, there are usually about 5 or 6 episodes on each disc, so in that case, a newly released dvd of a tv series would not be $1 per show, but rather $1 per disc.

In this sense the $1 fee is more of a competitor to pay channels like HBO, Showtime, etc. I don't know when was the last time I watched 12 new shows on HBO in one month...

I wanted to clarify this point because some folks seem to have morphed that idea into $1 for every show you stream through netflix. I don't see that as a realistic scenario at all.