Tag Archives: Pay television

Posts Of The Year – 2015 – #3

I am going to continue an annual tradition this week and repost the most-read screeds of the past year.  I am very grateful to the folks from 91 countries around the world who read them this year, although I’m not sure why I seem to be so popular in Brazil (the second country behind the US in terms of readership!).  This post, the third most-read, non-food post, was from October.  It touches on a subject that came up a few other times this year, and one I expect will be front and center in 2016: cord-cutting.  It was originally titled  Shaving The Cord. Enjoy!

You might have heard something over the weekend about a glitch in the Nielsen ratings system that affected the estimated audiences all the way back to March.  While that is kind of problematic for the TV industry, it was other Nielsen data that presents much more of a long-term problem.  As Cynopsis reported:

The top 40 cable channels have lost more than 3 percent of their distribution over the last four years, according to a Wall Street Journal analysis of Nielsen ratings data. How to account for the decline, which exceeds the loss of subscribers? Pay-TV customers are signing up for less expensive bundles with fewer channels, says the WSJ. “What we are seeing is some cord cutting and some cord shaving,” Nielsen global president Stephen Hasker told the paper. “Consumer time and attention is shifting.”

You can read the Wall Street Journal article by clicking through.  As someone who spent a long time in the TV business, I understand why channels are bundled.  Way back when, the market was far less fragmented and the business model evolved where there really weren’t tiers other than the true premium channels of HBO and local sports networks.  Today, even the “major networks” of ABC, CBS, Fox, and NBC attract audience ratings in the low single digits even for top programs.  Yes, DVR viewing can boost some of their audiences as much as 80% but think about it.  What’s the difference between watching “Gotham” via Hulu (the internet) or on your DVR (the cable bundle)?  Other than being able to skip the commercials on a DVR, not much.  In fact, one could argue that advertisers would prefer that consumers watch in the non-skippable internet interface.

The real point is that how consumers come to content has changed and yet the people who are the middlemen in offering the content – the cable companies – haven’t moved off a business model that evolved in the 1980s.  As the  Journal states:

Data points are piling up to show “cord shaving” is for real. At least two pay-TV providers say about 10% of gross TV subscriber additions are customers who are taking a slimmed-down bundle—in contrast to the bigger ones with hundreds of channels that can cost upward of $100 a month.

So the choice for the providers, as it is for all of us in our businesses,  is to change or to shrink.  They can’t just keep raising prices.  At some point that makes the problem even worse as consumers pay more for channels they don’t watch.  What’s your solution?

Advertisements

Leave a comment

Filed under Consulting, digital media

The Coming Cable Shift

I got into a discussion with someone about the major shift that’s taking place in the cable industry. Specifically, we were discussing all of the ala carte services that are becoming available. Netflix, Hulu and Amazon Video are just the start. You’ve heard that major networks – CBS, NBC, ESPN, and others – are going to provide a streaming service via broadband. I wrote about that a couple of weeks ago so I won’t repeat myself . However, in a time when 13.5% of broadband households with an adult under 35 have no pay-TV subscriptions and 8.6 million US households have broadband Internet but no pay-TV subscription with millions more likely to cut the cable cord in the next year, the times are a changin’.

The person with whom I was discussing this didn’t think it was a big deal. First, the cable guys are also ISPs so they make their money (at higher margins) there. Second, people will find that paying a lot more for fewer networks isn’t so great after all. I told him he was missing a point.

When you pay the cable bill each month, much of that payment gets divided up among dozens of program providers. ESPN takes the biggest chunk, around $6 or $7 according to reports as does sports programming in general. Other networks get fees ranging from $1.50 down to a dime. That’s per household per month. You do the math.

The point he was missing is demonstrated by HBO. HBO is never a basic network, meaning it’s never just included. You pay $10 a month or so for it. HBO uses that money to fund a lot of spectacular programming. Now, so does Netflix.

When the model changes the cable guys are no longer distributing the pot to programmers as they see fit. Consumers are paying for what they watch.

Even if the out-of-pocket doesn’t change, the money goes to a much more limited set of content providers. They, in turn, will have the ability to invest in better content. Yes, I realize that 10 cents a month from 50 million homes is better than $2 from 2 million homes. The difference is that payment from the larger audience will never get bigger unless your network is moved to a bigger, more basic tier or you can negotiate your way to a bigger fee. Providing the network directly doesn’t cap your growth and developing a hit can provide a big growth in revenues. Think of your friends who will subscribe to HBO or Showtime just to watch a favorite series.

I would not want to be a minor network in all of this. I suspect we will see some bundling of like networks that don’t share ownership. I also think we’ll see many networks go dark or end up as free, ad-supported channels on some service – Apple TV, YouTube, whatever. One thing for sure – five years from now the business I grew up in won’t resemble the one we’ll be living with.

Thoughts?

1 Comment

Filed under Consulting, Thinking Aloud

Shaving The Cord

You might have heard something over the weekend about a glitch in the Nielsen ratings system that affected the estimated audiences all the way back to March.  While that is kind of problematic for the TV industry, it was other Nielsen data that presents much more of a long-term problem.  As Cynopsis reported:

The top 40 cable channels have lost more than 3 percent of their distribution over the last four years, according to a Wall Street Journal analysis of Nielsen ratings data. How to account for the decline, which exceeds the loss of subscribers? Pay-TV customers are signing up for less expensive bundles with fewer channels, says the WSJ. “What we are seeing is some cord cutting and some cord shaving,” Nielsen global president Stephen Hasker told the paper. “Consumer time and attention is shifting.”

You can read the Wall Street Journal article by clicking through.  As someone who spent a long time in the TV business I understand why channels are bundled.  Way back when, the market was far less fragmented and the business model evolved where there really weren’t tiers other than the true premium channels of HBO and local sports networks.  Today, even the “major networks” of ABC, CBS, Fox, and NBC attract audience ratings in the low single digits even for top programs.  Yes, DVR viewing can boost some of their audiences as much as 80% but think about it.  What’s the difference between watching “Gotham” via Hulu (the internet) or on your DVR (the cable bundle)?  Other than being able to skip the commercials on a DVR, not much.  In fact, one could argue that advertisers would prefer that consumers watch in the non-skippable internet interface.

The real point is that how consumers come to content has changed and yet the people who are the middlemen in offering the content – the cable companies – haven’t moved off a business model that evolved in the 1980s.  As the  Journal sates:

Data points are piling up to show “cord shaving” is for real. At least two pay-TV providers say about 10% of gross TV subscriber additions are customers who are taking a slimmed-down bundle—in contrast to the bigger ones with hundreds of channels that can cost upward of $100 a month.

So the choice for the providers, as it is for all of us in our businesses,  is to change or to shrink.  They can’t just keep raising prices.  At some point that makes the problem even worse as consumers pay more for channels they don’t watch.  What’s your solution?

1 Comment

Filed under Consulting, digital media

Butterflies Or Blips?

A report came out yesterday afternoon which got me to think again about the changing television business. Coupled with a few other things going on, I wonder if they’re the harbingers of some sort of butterfly effect in the media business or if they’re just aberrations. Let’s see what you think.

Cable tv

(Photo credit: Wikipedia)

The report is from the Leichtman Research Group (LRG) and it showed that video subscriber gains in the first quarter of 2013 by top U.S. service providers were not enough to avoid a first-ever net subscriber loss in the category over a four-quarter period.  In other words, fewer people signed up for pay TV – which is pretty much any kind of cable or other video service – than cut one off.  As Multichannel News reported:

Leichtman attributed the downward trend to a combination of a saturated market, an increased focus by service providers on acquiring higher-value subs, and seeing some consumers opt for a “lower-cost mixture of over-the-air TV, Netflix and other over-the-top viewing options.”

So that’s one thing – cord cutting.  Is it overemphasized by many at this point?  Probably, but when you see something happen for the first time ever, you need to pay attention.  Then there is the bill submitted by Senator McCain to use regulatory incentives to encourage programmers and distributors to unbundle their channels and offer a la carte programming.  This means that if you don’t watch a channel you wouldn’t have to buy it as part of a bundle.  So if you’re effectively paying $5 for ESPN as part of a basic cable package and don’t watch it or want it available, you might get a price break.  Then again, those of us who do watch it might be paying substantially more each month as the user base diminishes.  Do I think the bill will pass?  Probably not since the idea has been around for years.  However, it might just be another butterfly flapping its wings, especially given that there are many more options for video (see point 1!).

Finally, ESPN cut staff yesterday despite record profits.  One would assume they know what their projected P/L looks like and they have committed a lot of money to rights over the next few years.  Making cuts now ahead of the new rights kicking in can help maintain that profitability   Again, another butterfly but pair it with the potential for ala carte cable and fewer pay TV buyers, and then ask if these are butterflies or just blips?  What do you think?

Enhanced by Zemanta

Leave a comment

Filed under Thinking Aloud, What's Going On

Detective Movies and Broadband

When I watch a thriller or detective movie, I find myself paying a lot of attention to minor things – a front desk clerk, a random event like what’s playing on a TV in a bar – because inevitably the end of the movie involves something that was hinted at earlier.  The key is usually something to which no one seems to be paying attention but would have been recognized as highly significant had they been.

I thought of that when I read a couple of articles over the last week and as I’m going through the reports of yesterday’s new iPad announcement.  Let’s see if the pieces – none of which is seen as a big deal – get you thinking about the ending as they do to me.

First off, there was the report from Nielsen that looks at cord-cutters – those homes that have abandoned cable TV and are using the Internet and over the air signals to watch the programming they previous got via cable:

Though less than 5 percent of TV households, homes with broadband Internet and free, broadcast TV are on the rise—growing 22.8 percent over last year. These households are also found to exhibit interesting video behaviors: they stream video twice as much as the general population and watch half as much TV.

Even among those who haven’t cut the cord, there is a shift to video and Internet provided by the telephone companies:

The number of homes subscribing to wired cable has decreased 4.1 percent in the past year at the same time that telephone company-provided and satellite TV have seen increases of 21.1 percent and 2.1 percent, respectively.

Maybe it’s in part due to higher bit-rates available from companies traditionally seen as ISP’s?  After all, access to broadband Internet is a big priority:

Demonstrating that consumers are increasingly making Internet connectivity a priority, 75.3 percent pay for broadband Internet (up from 70.9% last year); 90.4 percent pay for cable, telephone company-provided TV or satellite. Homes with both paid TV and broadband increased 5.5 percent since last year.

OK – that’s a few of the “minor” characters – nothing huge there.  Now add this:

Across Europe, the Web has surpassed TV as the primary platform for 18-to-35 viewers to watch their favorite sport, according to new research conducted by Havas Sport & Entertainment for the Global Sports Forum Barcelona.

And this:

Stateside, the evidence suggests that more sports nuts are choosing to forgo pay-TV services for Internet services. According to The NPD Group, iVOD users reduced the time they spent watching television shows, news and sports via pay-TV companies by 12% between August 2010 and August 2011.

Every major sports league has some sort of online pay package available, which is not new.  Now let’s add in the new iPad which is becoming the second screen of choice for a lot of people along with an improved AppleTV that makes putting streamed content on to your HD television a snap.  Suddenly, we might be looking at a milestone (and the end of the movie for some businesses).  Live sports is one of the (and I think THE) killer apps.  Up until recently it’s been hard (or illegal) to find your live sport of choice outside of pay TV available through a cable operator.  Suddenly, higher speed broadband married to better devices married to that content being available via your ISP and the ability to throw it on to your big screen TV with no loss of quality while marrying it to apps, data, and social interfaces might be a twist no one saw coming.  Except I think maybe now we can.

What do you think?

Enhanced by Zemanta

2 Comments

Filed under digital media, What's Going On

Familiarity And Contempt

If you’re looking to buy stuff, it’s a great time to make new friends. For example, there was an offer by my cable provider to those who use another service for cable to be a “triple playcustomer (TV, internet, and VOIP) for $70 a month. Considering that I play more than double that just for TV, it seems like a pretty good deal, right?

Children's Valentine, 1940–1950

Image via Wikipedia

Not for me it isn’t. I’m a current customer and, therefore, not eligible for that rate.  I’m not singling out the cable company – they’re hardly the only firm that makes more attractive business deals available to folks with whom they aren’t currently doing business.  Wireless carriers, financial services (Free stock trades!  Better interest rates!  Shiny toasters!), magazines and others often treat their new flames better than they do those to whom they’ve been “married” for years.  So on this Valentine’s Day, I’m reminded that maybe that familiarity leads to some contempt and maybe divorce? Continue reading

Leave a comment

Filed under Consulting, Helpful Hints