Tagged: Cord Cutting

No one wants satellite TV any more

The entire pay TV industry is being shaken by the emergence of cord-cutting, also known as people realizing they don’t have to pay $105 a month for TV. Cable TV had an awful 2017, but a new report confirms that it’s satellite TV that’s really feeling the hurt.

Satellite TV was down nearly 1.7 million subscribers in 2017, claims a Kagan report seen by Multichannel. Cable dropped nearly a million subscribers over the same period, but cable subscribers make up a far larger share of the market than satellite.

Part of the loss is attributable to one-off events, like the hurricanes that swept the US in 2017. AT&T said that hurricanes in the southeastern US and earthquakes in Mexico last year hurt its subscriber base, back when its Q3 losses were particularly heavy. At the time, analyst Craig Moffett said that it is “becoming increasingly clear that the wheels are falling off satellite TV.”

The big hope for AT&T, the owner of the largest satellite TV company in DirecTV, is to transition customers to a streaming alternative. AT&T has pointed to the rapid subscriber growth of DirecTV Now, its streaming pay TV service, as a reason for optimism.

In a way, AT&T has a point. Kagan’s 2017 report suggests that there are 3.3 million streaming pay TV subscribers in the US, with the market dominated by Sling and DirecTV Now. But it’s increasingly unclear whether the current streaming TV setup is sustainable. AT&T offered aggressive promotions to its wireless customers to persuade them to sign up for DirecTV, with the price after discount falling as low as $10 per month. At that price, AT&T is losing money on every subscriber it signs up, thanks to increasingly expensive deals with the content owners.

Even at the $35-40 per month price that most streaming services charge, it’s unclear whether anyone is making any money. One industry source told BGR that the streaming services are falling a few dollars per month short of covering the cost of programming. Networks have been slowly increasing the cost of programming for the last few years, especially for must-have channels like sports, but thanks to the competition in the streaming TV market, the streaming services haven’t been able to pass the cost on to consumers. Instead, margins have been nibbled away, leaving an expensive-to-run service that barely breaks even.

The result is likely to be good for consumers, but bad for the telecoms companies. People may well sign up for streaming services at record numbers, replacing the customers lost from satellite and cable, but the profits that telecoms make on cable and satellite won’t be replaced.

High prices continue to drive cord-cutting

Cord-cutters ditching traditional pay TV for streaming cable alternatives are at an all-time high. Every quarter sees another record broken for people leaving cable, while streaming pay TV and Netflix continue to grow at astronomical rates.

It’s easy for cable execs to blame the problems on gosh-darn millenials who are glued to their phone and don’t want to watch the evening news. But the evidence shows that actually, it’s the increasingly high prices that cable companies charge that’s to blame.

Data from TiVo’s Q4 2017 video trends survey continues to back that up. Among pay TV users, high prices was the most common cause of dissatisfaction, with 83% of unhappy users saying that price was to blame. Among cord-cutters, the numbers were even worse:

Though previously mentioned, it’s worth noting again that of those respondents cutting pay-TV service, 86.7% do so because of price, and this category increased by 6.6 percentage points y/y. As price drives both dissatisfaction and cord-cutting, these two results support the view that some respondents can’t justify the high price of cable/satellite service, especially with the availability of lower-cost options like Netflix and Hulu. Now that these services also offer original content, streaming also cuts into the daily viewing time of pay-TV services, potentially leading to a deterioration of perceived value. Pay-TV providers must act before consumers reach their tipping point.

The study also found that customers, unsurprisingly, hate the channel bundles. According to the survey, 81.3% of consumers would like a la carte programming, up 4.7 percent from a year ago. Even the streaming options don’t allow a la carte programming — $35 or $40 gets you the standard bundle, with add-ons for things like HBO.

Cable companies are responding to record-breaking cord-cutting by shortening ad breaks

Whether it likes it or not, the pay TV industry is in the middle of a revolution. More people are ditching cable and satellite TV than ever before, and a new generation is growing up with Netflix and YouTube, rather than a $100-a-month cable package.

Responding to the change (and doing so without losing billions in profits) is proving to be a challenge for cable companies, but at least the industry seems to be getting one thing right. Both NBC and Fox have announced in recent weeks that they’re going to dramatically cut the number of ads on their channels, a consumer-friendly move that they’re hoping will work better with the Netflix generation.

At an industry event last week, Fox Networks Group’s ad sales director Joe Marchese announced the company plans to cut ad times down to just two minutes per hour, according to the Wall Street Journal. Broadcast ad times were around 13 minutes this year, so the cuts Fox are proposing would slash ad times by a whole order of magnitude.

“The two minutes per hour is a real target for Fox, and also our challenge for the industry,” Ed Davis, chief product officer for ad sales at Fox Networks Group, told the WSJ in an email. “Creating a sustainable model for ad-supported storytelling will require us all to move.”

Fox isn’t alone in this change, either. NBCUniversal announced last month that it “plans to cut the number of advertisements in commercial breaks by 20% and to decrease advertising time by 10% during its original prime-time programming across its broadcast and cable networks.”

Linda Yaccarino, NBCU’s ad sales guru, told Variety that the change was directly driven by the limited-ad model of streaming services. “There are more and more consumers, whether it’s from Hulu or the Netflixes or Amazons of the world, who are liberated via technology” from having to watch the sheer number of advertisements shown on traditional television, said Yaccarino. “TV networks would be crazy to believe that anything other than commercial overhaul was anything other than inevitable.”

Both companies aren’t necessarily planning on losing money by shrinking ads, however. Fox and NBCU have both suggested that limiting commercial time will make the ad slots more impactful for the audience, and thus more valuable for advertisers.

Cord-cutting just hit another record, and cable companies are in denial

The pay TV industry is in the midst of a huge change. Half a million pay TV customers cancelled their contracts in the last three months of 2017 alone, analysts at MoffettNathanson Research calculated this week. That makes a drop of 3.4% from the same period a year earlier, the biggest change since 2010.

This is an undeniably huge deal for the pay TV industry, but executives are still in denial, claiming that streaming services are going to take the place of cable and make everything just fine.

If you look at the numbers, you can see where they’re coming from. MoffettNathanson estimated that nearly 4.6 million customers subscribed to the five leading internet TV services, led by Sling TV, which has 2.2 million customers, a growth of 47 percent year-on-year. Any kind of paying media company would kill for that kind of growth. DirecTV Now, AT&T’s streaming service, has also been off to a flying start, and Hulu Live TV and YouTube TV keep growing. With Disney set to launch its own streaming service next year, the future seems bright for customers who want to ditch cable.

But for the pay TV industry that’s used to monster profits, streaming TV doesn’t promise such a rosy future. The average streaming bundle costs right around $40, with a few add-ons possible for premium content channels like Showtime or HBO. The average cable package, on the other hand, is a little north of $100.

The price difference isn’t because cable companies are able to negotiate cheaper deals with the content owners. It’s because most of those streaming packages are available nationwide, whereas most people are limited to whichever cable company owns their regional monopoly. Competition is keeping the price of streaming services right down to the actual cost of those channels — and in some cases, industry sources have told us that companies are losing money. Especially when you consider bundle deals, like the discount AT&T gives wireless subscribers on DirecTV Now, streaming services might have subscribers, but they’re not generating much profit.

As cable TV stops being a profitable industry, you can expect the cable companies to double down on their last existing revenue stream: home internet. Streaming services are only competitive thanks to the internet, which provides widespread distribution without any regional lock-in, for now at least. A cynic would say that cable companies can see the future coming, and their vigorous hatred of strong net neutrality enforcement is paving the way for streaming TV services to be locked in, much like Charter is doing with its new streaming service.

Charter’s new streaming service is just as bad as cable

Following a limited test run last year, Charter is reportedly rolling out its new streaming TV service, the generically-named Spectrum TV Choice, to all its customers. Legacy cable companies trying to hold on to customers by deploying a cheap streaming service was the main theme of 2017, so it’s no surprise to see Charter jumping on the bandwagon with its own service.

But whereas every other company has managed to see the benefits of streaming, like cloud DVR and TV viewing you can take everywhere, Charter’s streaming service is really just cable TV, delivered by slightly more modern technology.

The pricing and channel bundles for Spectrum TV Choice actually look pretty good. The price is $25 a month including fees, for which you get the big five broadcast networks, your choice of 10 additional channels from a list of 65, and the option to add premium content like HBO or Showtime for $7.50 a month each. On paper, that looks better than DirecTVNow or YouTube TV.

But the problems come when you start actually trying to watch those channels. Just like other streaming services, you can watch Spectrum TV in a browser, on a mobile app, or using an Xbox or Roku. There’s no support for Chromecast or Apple TV right now, but hopefully that’s in the pipeline.

The biggest problem, however, is that you can’t watch most major channels outside of your home. Spectrum TV Choice apps detect your internet connection, and if you’re not using the Spectrum internet registered to your account’s address, the apps won’t work.

That makes this less of a streaming TV service, and more like traditional cable delivered over a managed data connection. As a customer, it means that the service is tied to a physical location, which sucks; for the broader industry, it means that Spectrum TV Choice is limited only to Spectrum or Charter internet customers, so it won’t improve competition on the national level in any meaningful way.

Oh, and it’s also kinda worse than a cable package, because there’s no DVR included. If you want to rewind or record shows, you’ll need to pay an extra $20 a month for a cable box, and all your recordings will only be viewable from that box. Other streaming services like YouTube TV and Fubo, for comparison, offer a cloud DVR that will remotely record programs and make them available on any device.

In a way, it makes sense for Charter to dabble with streaming TV in a non-serious way before deciding whether or not to fully commit. But it also seems to show that the cable companies don’t get why people dislike their cable packages. It isn’t the physical wire coming in to the house, or the need to use cable boxes; it’s that cable companies have regional monopolies, and the only way we’re ever going to get a competitive pay TV market is if customers have their choice of a dozen different streaming services, all of which are available nationwide.