Cable TV Bills? Not Going Anywhere
Hulu, YouTube, and other Internet sources of movies and shows notwithstanding, consumers will still turn to their TV sets for entertainment—and pay cable companies for the privilege. Pro or con?
Read the debate by guest columnists Ron Frankel and Ryan Lawler and watch the video with Bloomberg cable-TV analyst Paul Sweeney
Pro: The People Want Their Sopranos
Lose ESPN, Disney, Nickelodeon, Discovery, and E!? No way. Which is why fewer than 5 percent of subscribers will sever their pay TV relationships.
People love watching TV, now more than ever. The average 40-year-old watches 40 hours a week. TV viewing is up 22 minutes per month, and 91 percent of TV households pay for TV subscriptions, according to Nielsen. And though they may complain, most folks will keep paying their cable bill.
Why? Because the best content is available only through a pay TV provider. And as for those few seriously considering a switch to over the air (OTA) or Internet options such as Netflix, Hulu, iTunes, Amazon, or YouTube, they will find lower quality and limited offerings. This doesn’t even count the hassle factor of slogging through websites figuring out where content is and when it can be viewed. Plus, attach an antenna to the roof lately? Moreover, anyone thinking they’ll cut costs by “cutting the cord” may be disappointed as costs for content increase across the board, whether at Netflix or Hulu Plus or on a cable bill.
Pay TV is here to stay not only because of compelling content, but also because cable, satellite, and telecom providers are pumping up their online offerings with initiatives such as TV Everywhere (TVE), which permit consumers to access TV programming any time, anywhere, on laptops, smartphones, and tablet devices. HBO GO made its debut with 4 million fans downloading the app to watch True Blood and Game of Thrones. Now 85 percent of HBO GO users are watching more HBO content and reporting higher customer satisfaction than ever before. Time Warner Cable also launched its live-TV iPad app, which was downloaded by 360,000 users in the first month, and the company will even subsidize subscribers using Slingbox.
Cable bills aren’t going anywhere.
Con: Gratis TV on the Web Is Too Tempting
Before the second quarter of 2010, the multichannel video industry—which includes cable, satellite, and IPTV providers—had never lost subscribers. But in three of the past five quarters, more viewers have stopped paying for TV than have started. And in the most recent quarter [the second quarter], pay TV providers lost as many 450,000 paying subscribers.
Think about that—an industry that had grown nonstop for more than three decades lost half a million users over three months. Of course, that has caused many to wonder whether declines will continue and whether they’re due to greater adoption of online video.
Ask anyone in the industry, and they’ll tell you that the problems it faces are saturation—more than 85 percent of households pay for TV, so there’s really nowhere to go but down—and a down economy. Ask any people who have gone without cable for whatever reason whether they plan to go back when the economy improves, and chances are they’ll say no.
The real problem cable faces is a weaker value proposition—due to ever-higher cable rates—and the emergence of more affordable viewing options. It’s difficult to ask consumers to pay $50 a month for TV when they can get unlimited streaming from Netflix for $7.99. As the availability of more content on new digital distributors becomes more common—and as those distributors find their way onto TV and mobile apps—the need to pay for live TV continues to dwindle.