Posts Tagged ‘Cox’

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.”