Posting in Food
One of the big topics at this month's CES show in Las Vegas was customers dropping their cable or satellite subscriptions, as they previously dropped their telephone lines. But this redistribution of wealth business is trickier than I thought.
I have been without a wired telephone connection for five years now. Everyone in the family now has their own phone, which they keep with them.
But while this cord cutting has made life more convenient it hasn't grown cheaper.
I pay about $150/month, which is just about what I previously paid for my wireline phone and long distance calls. It's also less convenient -- I have to fire up my Netbook and Google Talk if I want to communicate outside the country.
The cost improvement of cutting the cord, in other words, can be marginal.
Michael Greeson of The Diffusion Group thinks it may work out the same way with pay television. Both sides will lose.
Cable TV operators certainly think so. Their name for people who cut their cable service and get all their video over the Internet is parasites. (The image above is from StoptheCap, which argues against usage caps on broadband service, one way cable giants are trying to cope.)
You have to get your Internet from somewhere. If you want video and other high-bandwidth services you need a wired connection. You're no longer dealing with the phone company, so chances are your cable operator is also your Internet Service Provider.
Comcast knows this. It's why it bought NBC. It has seen how broadband Internet service can be "tiered" -- it's already doing it.
ISPs buy ESPN360, and add it to their customer bills. I didn't ask for it. In theory it's a good thing -- lots of sports streaming into my home, many games I can't get otherwise. But it's also an opening wedge in the next big battle for control of your "pipe."
If ESPN can get that deal, why not NBC? Especially if NBC and the cable company are the same outfit? So now you've got a second charge, for unlimited access to Hulu. Now Time Warner and Comcast make a cross-licensing deal, and you've got a third charge, for accessing Time Warner's content. Wash, rinse, repeat. Viacom, Fox, Scripps-Howard.
Pretty soon your broadband bill is $150/month, same as before, and Comcast retains the same power over you it has as your cable provider. Prices are determined by negotiations between Comcast and program providers, and Comcast is sitting on both sides of the table.
That's one vision, and in some ways it's not bad. As James Surowiecki wrote recently at the New Yorker, bundling can be a bargain. If you tried a la carte pricing on cable television, chances are your bill would go up, not down, because each channel would be charging you retail, not the bundled price they give the cable operator.
This is not a rip-off. Selling retail means paying transaction fees. It means marketing. It means developing a personal relationship with each customer, and getting the cash invested out on that relationship. HBO costs about $12/month. FoodTV probably wouldn't cost much less, if it had to find customers one-by-one. And video costs money to produce, more money than ads can ever provide if the business is to grow.
This redistribution of wealth business is trickier than I thought.
Jan 24, 2010
I don't really see how it is marginal. If you make some sacrifice the savings is huge. I plan to take free TV over the air combined with ROKU/Netflix combination and bring my bill down from about $80 to $8/mo. http://cutthecablecord.blogspot.com/2011/01/plan-roku-off-air.html
Satellite Direct is a SCAM !!! They are a criminal enterprise. DON'T BUY IT!!! Do some research on Google first!!!
I have little doubt that the bundling of channels does create bargains. I have no doubt whatsoever that the vast majority of viewers have no use for the majority of the channels supplied by their cable or satellite operator. Local utility regulators are too small to compel operators to offer the viewers within their jurisdictions a choice between a-la-carte & bundled plans. Don't expect any action at the federal level after last week's ruling by the Supremes on corporate campaign contributions. If we all end up paying for content rather than having it be supported by ad revenue then, in theory, there will be a corresponding drop in the prices of good & services because ad budgets will go down. Easy for me to say since I don't work in the ad business.
I guess it's not clear to me why you dismiss the telephone company as an Internet provider, unless you are among the non-landline telephone subscribers. We tried our cable company--Time-warner for a bundled service--TV-Internet-Telephone, and finally dumped them for the latter two, returning to our local telephone company for phone and DSL-Internet. Mainly, we switched back because the cable company sucks on service, as do most large companies who think they have their customers by the balls.
I call it the "entertainment tithe", and it's been out-of-control for over a decade now. What I find most offensive about it is that even on a "basic" plan, I am forced to pay for dozens of channels that I have absolutely no interest in. Fortunately I live in an area that has enough competition to keep Comcast from getting completely out of control. Although Comcast has the better Internet, I'm about to play Comcast against AT&T (which is offering a superior television package) to see how much I can squeeze out of Comcast. If Comcast will not play, I will jump ship, at least for the television. But Dana is correct that there is a war coming between the content producers and the content distributors over who is going to pay what, and in the end it can only come from the end consumer. But the mistake I think they will make is that the demand curve for their product is not as inelastic as they like to think, especially at a time when more of their customers are taking a close look at their monthly expenditures. At some point, people are going to start cutting the cord even if it means access to less. And even though I know I'd be paying more-per-channel with a la carte, I still think I'd be better off. At least I wouldn't be subsidizing MTV & E! anymore.
Verizon (formerly GTE) never built any ADSL equipment to serve my area, so for years I've been using Comcrap. This weekend, I fired them & it IS a big adjustment. But, I'll adapt. Several of my neighbors have open WiFi connections, so I can use a BitTorrent client for my TV shows or Hulu. Best of all, I've hacked my WinMo cell phone for use on my laptop. Why should I add to the profit margins (and outrageous pay & bonus packages their CEO's get) when they are trying to limit my service? We need 'Net Neutrality' and we need to break up these media companies, so no one can control both the media & the 'pipe'.
You don't seem to get that there is more than one world out there. I assume you are generally addressing suburban Americans, but that is a tiny fraction of the world. There is no cell reception here. I get phone and internet (1.5 M ADSL) via my phone land line for just over $C30 a month, so I am not dropping that. True I also pay $35 a month for cable TV, but plan to drop that once the olympics are over since we only watch TV for two weeks every other year and the disconnect / reconnect charge is only $C30. Have you really asked yourself whether you are getting real value for your $150 a month? Peter