Posts Tagged ‘AT&T’

Selling TV By The Byte

A recent article on the Fierce Video Web site suggests that smaller cable TV system operators like Cable One and Mediacom might be better advised to let cord-cutters walk away and switch their service offerings toward straight broadband access. The two companies have lost 10.3% and 5.5% of their subscribers Y-Y and in fact, Cable One has stated that they lose money on every pay TV subscriber now.

Given the increasing number of television homes that access premium content via streaming (and that includes yours truly), it’s looking like cable MSOs might be better off simply providing fast Internet service at multiple tiers, letting consumers decide what do with their access.

This model isn’t unlike that of your local electric utility – they simply charge by the kilowatt hour – or even your mobile phone service provider, who stopped charging for minutes and texting and now bills you for how many gigabytes of data you use every month.

What about the big guys, like Comcast, Charter, Cox, and AT&T? In the article, analyst Craig Moffett of research firm MoffetNathanson states that none of these companies are likely to give up on pay TV bundles any time soon, but “…If Verizon Fios and Cox—we suspect they would likely be the first two—and then later Altice and Charter, decide to stop even trying to stem the bleeding, well … then the bleeding will get worse.” Moffett goes on to say that Comcast would probably be the last MSO to drop pay TV packages because of its ownership of NBC and Universal.

Things are even worse in the satellite TV business. Moffett estimates that Dish Network, which is pushing Sling TV as an alternative to Dish, is losing almost 11% of its subscribers Y-Y. And AT&T is trying to switch DirecTV customers to cable and broadband delivery.

From my perspective, moving away from expensive TV bundles, which are largely underutilized by customers (the average pay TV customer watches 17 channels at most) and not popular at all, to a model of delivering megabytes and ultimately gigabytes of data, makes a lot more sense and is considerably easier to service and maintain.

Just about every TV you can buy today comes with some sort of on-board intelligence, an operating system, and an Internet connection (wired or wireless). Content providers Amazon, Hulu, and Netflix have set up large server farms across the country to stream content more reliably to the home, and major cable companies like Comcast have added Netflix and Amazon Prime apps to their IT-based sidecar boxes.

So, the groundwork is being laid as I write this to adopt a simple “pay as you go” broadband delivery system. Will it happen soon? My guess is that you’ll see such a transition within the next decade, especially with companies like Apple getting into content creation and delivery and more customers dropping pay TV bundles in favor of streaming.

Moffatt’s firm states that the cost of delivering video content would likely increase and prices for fast broadband prices would also increase as fewer subscribers opt for double-play and triple-play packages. However, that would improve operating margins since pay TV is more expensive to operate than broadband.

My own experience with Comcast is that they’ve set a target dollar figure they want to get from households each month, and they apply more aggressive discounts to bigger bundles (and fewer discounts to smaller bundles) to achieve that number, which appears to be north of $200/month before taxes and fees. I would suspect that target would hold with cord-cutting households that opt for a “single play” of fast broadband.

It’s no wonder that Comcast and other MSOs are venturing into services like home security and mobile phone service to try and prop up revenues, de-emphasizing video. Even Comcast Cable CEO Dave Watson was quoted in the article as saying “…his company’s strategy is centered on broadband and packaging in video only where it makes sense.”

By The Numbers – Or Maybe Not

Several news stories crossed my desk this morning that are each worth closer scrutiny. The first one comes from Reuters and says that Dish Network’s quarterly revenue missed forecasts as more customers disconnected their satellite antennas.

Dish stated that they had lost 23,000 subscribers on a net basis for the quarter ending September 30. In the same time period a year earlier, the net loss was 12,000 subs, almost half as many. And apparently the company’s new $20/month streaming service, Sling TV, isn’t proving to be as popular as expected.

The combination of DirecTV with AT&T also puts Dish at a competitive advantage, since AT&T can offer bundles of service (including mobile telephone) at competitive prices. Satellite TV has always been at a disadvantage to cable and fiber optic services due to issues with reception during inclement weather and the inability of some home and apartment sites to “see” the satellites, ruling out installations.

In my neighborhood, several folks canceled service from Comcast in recent years and picked up Dish and DirecTV as a cost-saving measure, only to drop both when Verizon laid fiber optic cables for FiOS and offered some low-cost, triple-play bundles that Dish and DirecTV couldn’t beat. (Internet service via satellite isn’t exactly fast and reliable.)

Right now, Dish’s most valuable asset is the UHF frequency spectrum acquired in FCC auctions- but it looks like that spectrum may go back for re-auction next February. And the DirecTV / AT&T juggernaut may force Dish into a merger to stay alive – or perhaps an outright sale.

So things aren’t looking too good for pay TV service providers? Not according to TDG Research. In a story on the Multichannel News site, TDG claims that “the percentage of adult broadband users (ADUs) who were moderately or highly likely to cancel their pay TV service in the next six months dropped 20% since last year.”

TDG went on to say that the group of consumers saying they “definitely will cancel” their pay TV service in the next six months has been cut in half — down from 2.9% in early 2014 to 1.4% in early 2015.” They cite the fact that Comcast only lost 48,000 video subscribers in Q3 2015, as opposed to 81,000 in the same quarter a year ago.

The problem with opinion surveys vs. market trends is that opinions can change abruptly. After a series of mishaps with Comcast’s Xfinity platform earlier this year (and well-documented on this site), I was about ready to throw in the towel and switch over to FiOS myself! But after my original complaint was resolved (replacing the buried cable from the drop to my house) and I wound up with a new modem (802.11ac 2.4/5 GHz), plus much faster Internet speeds and new Xfinity set-top boxes, I decided to stay with the devil I know – for now.

So the TDG data may reflect consumer preferences right now, but what will actually happen remains to be seen when the next set of quarterly data becomes available in January or February of next year.

There’s no arguing with numbers, however. From the Digital Entertainment Group (DEG) comes a report that consumers spent more money on digital video downloads and video streaming through the first nine months of 2015 than on rentals and purchases of DVDs and Blu-ray discs.

According to a story on the TWICE Web site, consumers forked over almost $6.5 billion on downloaded and streamed videos. The “digital” category includes subscription streaming and video-on-demand (VOD), plus digital downloads such as movies to tablets and smartphones. (Like I do when I fly cross-country).

In contrast, the dollar amount spent on rentals and purchases of optical disc media amounted to $6.3 billion – close, but still in 2nd place. From January through September, revenue from downloads and streaming rose by almost 16% Y-Y, while revenue from DVD/BD purchases declined by 14% and disc rentals dropped 7.1%.

Within the streaming/downloads category, the lion’s share of revenue (3.65B, or 57%) went to subscription streaming, while digital downloads captured 21% or $1.34B. The rest went to subscription video-on-demand ($1.41B, or 22%).

What’s interesting is that in 2014, the DEG states that “consumers spent more on physical media, about $6.93 billion, compared with $7.53 billion spent on digital downloads and streaming.” Overall, that means that in 2014, consumers whipped out their credit cards to the tune of $14.46B, or about $1.2B per month. Through September of 2015, that number is $12.74B total, or $1.42B per month – an increase of about 15%.

So there you have it. Cord-cutting (or “dish dumping”) is on the rise. Or maybe it isn’t, if we are to believe the preferences of consumers. Or maybe it’s the HDMI cable we’re cutting, preferring to stream and download videos as opposed to playing them back from optical discs.

One statistic I wish the DEG would delve deeper into concerns the installed base of Blu-ray players – almost 80 million households own one now, according to DEG. But how often are they used for playing movies, as opposed to streaming movies and TV shows from Netflix, Hulu, Amazon Prime, and other services? We just don’t know.

 

A ‘Contrived’ Broadband Crisis, Indeed

A news story in the Wednesday 10/12 edition of the New York Times announced that the Federal Communications Commission is partnering with Best Buy’s Geek Squad to teach Americans how to use the Internet and take full advantage of broadband services that are available to them.

According to the story, only 68% of Americans are taking advantage of broadband access. The author of the article compares that rate unfavorably to South Korea, where over 90% of Koreans use available broadband services.

The source of that statistic is not provided. But it’s a big “Uh Oh!” for the FCC, whose chairman Julius Genachowski has been on a one-man crusade to convince everyone that we have a wireless broadband spectrum crisis in the United States, and that TV stations should willingly give up 120 MHz of UHF TV channels (basically everything above channel 31) to address this ‘crisis.’

His clarion calls have also been parroted by the head of the Consumer Electronics Association, Gary Shapiro. Neither individual has provided substantive proof to back up their claims, leading many of us industry analysts to believe that the impetus for this fabricated crisis is being driven by telecoms like Verizon and AT&T at the expense of millions of Americans who rely on free, over-the-air digital TV as a counter to high-priced cable TV subscription plans.

Three reasons were cited in the article for the reluctance or refusal of 32% of Americans to sign up for and take advantage of ‘available’ broadband services to surf the Web. The first was the cost of Internet services and the cost of computers. Number two was not knowing how to use a computer, and number three was ‘not understanding why the Internet is relevant.’

The plan is for Geek Squad staff to partner with service organizations like Boys and Girls Clubs, Goodwill and 4-H in 20 cities to offer training in basic computer literacy. Microsoft is also on-board,  and will offer training in stores, schools, and libraries.

Now, I am not not by nature a political animal. But this seems like a waste of taxpayer money to me, particularly if Best Buy is deriving any benefit from the program.

Mr. Chairman: Have you not been reading the papers lately? (Sorry, I should have said ‘reading the on-line news sites.’) There are hundreds of thousands of newly-minted college graduates who cannot find jobs that pay decently, and are taking whatever work they can find to cover their monthly bills and student loans.

I’ll bet a sizable number are quite computer-literate and would be quite happy to instruct Americans about the ecstasies of ordering from Amazon, friending on Facebook, and streaming from Netflix, in return for a modest stipend from Washington, DC. Sort of a “Bits Corps” program, if you will. Why not put them to work? Best Buy doesn’t need the money.

I’d also like to mention that I know a few people who spend little or no time on the Internet, and have acquaintances that don’t even own a computer. They have no interest in surfing the Web and are quite happy functioning in what to them is a ‘normal’ world. Call them Luddites if you will, but they are co-existing with us ‘connected’ folks quite nicely.

It should not be the federal government’s job to make sure 100% of Americans know how to use a computer and do so on a regular basis. That is a choice for individual citizens to make. If Washington wants to establish an outreach program to help citizens get over a technology learning curve ‘hump’ so they can then make use of broadband connectivity, fine. But let it be run by volunteers in the finest spirit of our country, not government-subsidized employees of a big box retailer.

As for the ‘wireless spectrum crisis;’ we’ve called you out on it, Mr. Genachowski. It is a claim fabricated out of whole cloth and you should just drop it and leave what’s left of the free broadcast TV spectrum alone. Stop penalizing financially-pressed Americans by taking away one of the very few really good deals left out there…free HDTV.

Nuff said!