Cord Cutters Rejoice In Competition

For those that have cut the cord to cable TV, a new competitor may be trying to woo you back.  The acquisition of DirecTv by AT&T has opened up a new streaming service of cable channels called DirecTv Now.  And with an introductory price of just $35 a month, subscribers will get access initially to 60+ channels; spend a little more and get more packages of services.  Of course there is the added fee of broadband access and AT&T is offering its customers no data charges to access the service.  That is a huge win for AT&T Wireless and DirecTv Now customers. Data streaming costs could potentially add to customer spending should they choose these streaming services over cable. 

DirecTv is the latest entrant in the streaming business for live channels.  They will be competing with Dish Network's Sling TV and Sony's Playstation Vue.  If live isn't important and on demand is what you care about, then you can always continue subscribing to Netflix, Amazon Prime, Hulu, and others.  But should live streaming become a lucrative business, expect these services to try and build out their business to include access to live channels, too.

Can cable television operators like Comcast and Charter find subscribers coming to them or fleeing for these streaming services?  It depends on what low cost packages they offer to retain their value proposition.  Unfortunately where I live, Comcast has announced plans to raise fees for its various services.  Comcast and others will have to rely on its other businesses to grow.  What affect this cable price increase has on its subscriber base will be seen next year in its quarterly earnings statement.  I fear they may be hurt as streaming services like DirecTv Now take a bigger and bigger bite from their cable business. 

DirecTv Now isn't taking their new business for granted.  Reaching out to younger demo audiences, they have created an exclusive channel around pop music star Taylor Swift.  Expect more content exclusivity to be announced across all competitors to woo customers to subscribe and retain their respective services.  Competition will be good news overall for customers.

Cord Cutting Less Of A Worry

A CNBC story tells us that research from SNL Kagan indicates that "a flattening pace of cord-cutting and a projected broadband boost of 8 million subscribers over the next 10 years, media companies are quickly shifting the way their content gets delivered to consumers."  Truth is, the best way to stream is with broadband.  The cost of data from cellular, mainly because of plans that charge by the gigabyte, makes an impact on the household.  Households may not be buying higher packages of cable, but they are still getting the basic cable package and bundling broadband.  With a broadband package, consumers have wireless accessibility for tablets and smartphones.  And they get authenticated access to wireless outside the home.  In the Northeast Xfinity, Optimum, Time Warner Cable and others have been building out their wireless platforms to support their subscribers. 

Consumers have been moving toward streaming as a preferred way to view content.  Streaming both cable and OTT content to watch on all their devices.  NBC has just announced that they have already served over 1 billion streams of Olympic content.  Time Warner Inc. made a big investment in Hulu, a streaming subscription service.  And Disney/ESPN are finally looking at a streaming subscription package for their sports content. 

The success of broadband enables cable companies to drive bundling packages in a way to keep households connected to cable TV as they drive broadband subscription growth.  And per the report, the strategy has kept cord cutting from becoming a bigger issue.

The Future Success Of Netflix

Nothing lasts forever.  Even Netflix knows that; they watched their DVD business erode while working to navigate the streaming world.  It was a bumpy ride along the way but the result so far has been quite impressive.  But growth appears to be declining, according to the Wall Street Journal, and international challenges and content costs aren't helping. 

In August, the remainder of the U.S. subscriber base will see its monthly fee rise to $9.99; for my household that is $2 more a month or a 25% increase.  Yet that is not enough to satisfy investors in the business seeking more future growth from the streaming giant against greater competition from Amazon and Hulu.  So what is Netflix to do as its Act 3?

Of the options to consider, Netflix might want to build out a streaming tier of live content, at an incremental cost, as a skinny bundle to drive more cord cutting. They could add more advertising to the mix, either with an ad supported option or with more sponsored content to the stream.  Netflix might consider growing through expansion; perhaps the purchase of a studio like Paramount or some cable networks.  For Netflix, standing still is not an option.  They learned that lesson from their DVD rental business.  Existing growth of its subscriber base will dry up and future revenue growth must come from other business platforms. 

Google Fiber, What Happened?

The rise of broadband and the threat of cord cutting seemed to be the perfect recipe for Google to enter into a market and attract cable subscribers to its fast internet pipeline.  First launched in Kansas City and then pushing out to other markets, Google was the big new entrant that could truly upset the apple cart.  But for all the significant investment and buzz, the results have been less so.

According to Multichannel, "Google Fiber ended 2015 with just north of 53,000 video subs, according to a blog post from MoffettNathanson analyst Craig Moffett that pointed to fresh data from the U.S. Copyright Office."  Cable operators must be heaving a sigh of relief.  As other overbuilders have learned, it is hard to come into a community and take from the incumbent.  Was the deal not enough for consumers to switch?  Did the marketing message fail to hit its mark?  Or are we looking at a quiet launch, and the numbers don't yet fit the potential? 

The other thing to note, is that the Google Fiber number reflects the launch of video subscribers and does not report broadband customers.  Regardless, cable operators in these markets shouldn't laugh too hard.  Google has deep pockets and has shown a willingness to invest in projects for long term outcomes.  The fight may have started slow, but it is likely to be a lot more rounds. 

If Content Is Not King, Then What Is

It seems that content is no longer deemed so kingly.  Viacom shares are down, as are CBS, Time Warner, Fox, and Disney.  The future TV viewer cares little for linear TV channels and we are all growing tired of intrusive and too many commercials.  Even this year's Super Bowl ads, usually the cream of the creative crop, were duds.  And given how fragmented viewership is these days, harder than ever to determine what successful content is.  It seems that content may have lost its crown. So who is King of Media?

In the tug of war between content and distribution, the distribution side has to now be carved out into different verticals.  Cable operators saw a reversal in their subscriber numbers, showing growth and a hopeful long term trend away from cord cutting.  But that will take a few quarters to decide.  The cellular companies have been pulling no punches in their ad messaging, with T-Mobile going hard against Verizon.  And digital content platforms like Netflix, Amazon and Hulu may need to find more revenue streams when subscriber growth wanes.  Of the three, Amazon may be more stable given its diversified business that goes beyond content distribution. 

So who is King?  If content has given up the crown, distribution has yet to show that it has more power.  Perhaps Comcast had it right all along; be both content and distribution, NBC Universal and Xfinity, and stay the course. 

Cord Cutting, What Cord Cutting?

Have the winds shifted?  Is cable television rebounding?  Are households watching cable TV and television advertising?  A look at the top 3 cable operators might indicate that the cord cutting trend has reversed.  According to each of their fourth quarter reports, cable subscribers, as well as data and phone are all increasing.  Charter announced that they increased subs by 33k in the last quarter and 11k for all of 2015.  Last month, Time Warner Cable announced that it gained 54K in Q4 which will make its soon to be owner Charter Cable very happy.  And Comcast Cable added 89K in Q4 although down for the total year by 36 K in 2015. 

Is this reversal simply a Christmas present to the top cable providers or an indication that 2016 could be a growth year for them?  Not raising rates to households might be an encouraging sign.  But should greed get in the way of a better marketing a customer service approach, these sub gains may be short lived.

As Cable Rates Rise, Expect More Cord Cutting

Programming license fees continue to rise and cable operators respond by raising monthly subscription rates to its customers.  According to Multichannel, cable rates are expected to rise about 3% in 2016.  It amounts to a few dollars more each month but consumers are already getting tired of any and all increases.  Comcast rates are rising just as they planned to move channels off basic to more expensive digital tiers.  That means that consumers are paying more for less.  Skinnier packages don't necessarily mean lower costs. 

What will subscriber levels look like this year.  Some cable operators have seen a slowdown in lost customers and try to point to a reversal in the trend toward more cord cutting.  First quarter subscriber levels should dispel those myths.  As OTT networks like Amazon Prime, Hulu, and Netflix continue to push more original programming, and customers become more inclined to use them over cable TV for their video offerings, the value of cable decreases.  Cord cutting will only become more severe.  And for households on a limited budget, cable TV will stop becoming a must have for the home. 

Millennial usage has significantly shifted from the big screen television set to the handheld tablet or smartphone.  Their primary video consumption, driven partly by peer pressure, to watch and binge on OTT programming.  And if this next generation sees less value from cable, then when they leave their parents' home for their own residence, cable TV will not be a necessary utility for their new home. 

The wire to the home will be seen only for broadband consumption, not for cable or for phone.  And if cellular companies can make wireless packages that keep the price point for data reasonable, then consumers may make the cell phone company the primary provider of broadband services.  That is the trend facing the cable operator and that is the challenge that this industry must focus to find its next growth opportunity. 

Comcast Pushes Channels Off Basic

The NY Post has reported that Comcast is taking underperforming networks off their basic tier to reduce costs.  The networks targeted include Pop (the former TV Guide Channel, Spike and CMT (both Viacom owned networks) that are being moved to a more expensive digital tier.  It may not be a drop but it certainly reduces their subscriber base.  The article says that Comcast is creating skinnier bundles and reducing costs but it is unlikely that those costs will be passed directly on to consumers; rather, it may only delay the need to raise the costs of the basic tier. 

Unfortunately, when you look a little deeper, these three networks are hardly the financial reason why a cable subscription is expensive.  They are pennies per month in license fees compared to sports programming and other more popular cable networks.  And they were chosen because Pop is an independent network and Viacom has very little leverage with its other sister networks MTV, VH1 and Comedy Central.  None have the cache or demand that they once had. 

Comcast and other cable operators are already feeling the heat from cord cutting.  And big cable networks like ESPN are suffering directly with lost subscriber fees.  This article may only be detailing Comcast's first steps at taking more bolder steps to create a skinnier basic package to retain its cable customer base.  Cutting cable costs and promoting faster broadband service with a cable subscription are two ways cable operators like Comcast can reverse the cord cutting trend. 

Netflix Continues Its Expansion

News out of the CES is that Netflix is now available as a subscription service in 130 more countries.  And while China is not yet one of those international sites, no doubt they are on the radar.  But what is making Netflix a bigger competitive threat is that much more programming buzz is coming from the service.  The latest release is a 10 part documentary called "The Making Of A Murderer", a Serial like analysis of the penal system in a smaller town and an innocent man unable to find his freedom for 18 years.  And in a follow up twist, newly released, found guilt of murder.

Of course if lighter fare is more to your liking, Netflix has that too.  This December, they presented A Very Murray Christmas starring Bill Murray.  A holiday treat sure to make you smile.  It is this assortment of original programming along with movies and TV series that have made Netflix a must have OTT video subscription service.  It may also become enough of a rationale to lead to full on cord cutting.  With a something for everyone approach and a wide array of choices, Netflix and its expansion continues to dominate the media landscape. 

Disney And ESPN Rocked By Cord Cutting

High subscriber fees, a decline in sports interest, more entertainment choices, and other challenges have rocked the world of cable television.  The Disney company, a bellwether of the media industry, is feeling those changes firsthand.  In the last 2 years, we learn that the ESPN Network lost 7 million subscribers, ABC Family (to be rebranded to Freeform, a mistake I believe) has lost 5 million subs, and Disney Channel 4 million.  Hard to make up those revenue losses without raising advertising fees, but a smaller base doesn't help drive big increases.  It is unlikely to expect a rebound as consumers continue to cut the cord and seek more OTT programming alternatives.  And Netflix, Amazon Prime and others are driving them to switch with huge libraries of content ad the rise of original programming too.

For a must have network like ESPN, the rise in sports license costs, higher ticket prices to attend live sporting events, and other challenges have driven away the middle class family from attending games and building fan interest.  Instead, the draw has become fantasy gambling, a short term boon but ultimately long term killer of sports, in my opinion.  Television sports interest continues to draw healthy ratings, but the future generation fan may be less interested in watching.  As fantasy sites get barred from advertising and used in certain states, we may in fact be watching the tipping point in sports value.

As for networks like Disney and ESPN, their challenges are also being faced by other cable networks like Fox, Viacom, Scripps, AMC, and others.  Declining subscriber revenue cannot be made up easily.  Increased advertising minutes have led to viewers seeking OTT choices that are commercial free. It is no longer fun to watch a show or movie that has what appears to be more ads than content.   And that influx of ads, along with high cable bills, may be the two primary reasons customers are fleeing the cable universe. 

Amazon Prime Seeks To Master The Bundle

I have been known to say that history repeats itself; for good and for bad.  And in the world of marketing, a good idea is a good idea, often repeated under various creative strategies.  One such notion is the strategy of bundling, the art of combining items into a single, larger package.  Cable television did it quite successfully, first in bundling cable channels together and offering a large selection of differentiated networks at one low price, and again in creating the triple play of cable, phone, and data at one competitive price. 

Amazon has repeated that strategy with the creation of Amazon Prime, a bundle of services including same day delivery, cloud storage of photos, special offers as well as Prime Music and Prime Instant Video, all at a low annual fee.  And while the centerpiece is free delivery, the additional pieces help to create strong added value.  And the strategy seems to be working.

But delivery alone might not be enough and the value of content cannot be minimized.  Amazon seeks to strengthen its Instant Video subscription with original shows as well, including the Emmy winning Transparent. Now,Amazon Prime seeks to expand its Prime bundle with other subscription services.  According to Variety, "The retail giant has been pitching the idea to add third-party video subscription services to its Prime subscription service to TV networks and online video services, offering them Amazon’s huge Prime customer base with its existing billing relationships as an incentive."  That might suggest that services like HBO Now, Showtime, or perhaps even Hulu could be added to their bundle.  As cable has learned, the bigger the bundle, the more value perceived, the better to attract new subscribers to the service.

But cable has also learned what can happen when too big causes the bundled price to rise and for consumers to start cutting the cord.  For cable, it has led to the new term of the skinny bundle, with a lesser number of aggregated services.  As Amazon plots its growth strategy, let it also recognize that it can sometimes get too big.  Controlled growth, meaningful value, at a competitive price.  So far, Amazon Prime continues to make itself a valuable commodity, but if it leads to price increases then it can also hurt your efforts. 

TiVo Keeps Adding Subscribers

TiVo seems to be doing what other cable boxes cannot.  With a single box to manage all cable and OTT content to the television screen and mobile devices, customers seem to like their approach.  Their latest third quarter results have them gaining over 400,000 customers in the quarter through their cable partnerships and now have almost 6.5 million total customers.  According to Multichannel, its one of their strongest quarters to date.  With the release of their latest set top box Bolt and the start of the holiday season, the fourth quarter could continue to be strong for them.

Of course this is all happening as cord cutters continue to strike at the cable operator.  It seems that offering TiVo to their customers might be a good defensive strategy to keep customers from dropping cable.  Internal pressures might also worry TiVo with current CEO Tom Rogers leaving his post in February 2016.  How that might affect the future strategy of TiVo remains to be seen.  For now, TiVo is on track to exceed 7 million homes by early next year.

Digital Killed The Television Star?

If you remember back when MTV first emerged, the first music video was "Video Killed The Radio Star".  It spoke to the demise of the old media with the rise of music video.  It was certainly not true, radio did not die, although it too was changed as the result of technology.

Today, it is television that is being affected by the rise of new media, digital and streaming media.  Consumers no longer are tethered to a box; rather, the screen moves with us and we control when and where we want to watch.  It has led to cord cutting, not just because of the freedom of movement, but because the cost to access on a tethered box has gotten too high. 

We want smaller bundles at lower price points.  Netflix provides its bundle of TV shows and movies for a low monthly fee and Amazon, Hulu, HBO, and others each do the same.  And as consumers we can pick which of these services we wish to carry.  With cable television, the appeal of their large bundle of shows and movies, linear and on demand, diminished as the price of carriage kept rising faster and faster.  The biggest culprit of that rise has been sports programming and the demand to license its content has enabled more channels to carry a piece of sports.  Where a decade or more ago, sports was the exclusive home to a few nets; today, games are seen on dozens of regional and national sports networks.  And consumers paid for access to each and everyone of these nets to be accessible on basic cable.  Ultimately, consumers pay too high fees for too many networks they may not want. 

Has digital killed the Television star, of course not.  Neither did video kill the radio star.  But digital has changed the playing field so that consumers have more control to cut the cord when their primary source for video has gotten too expensive.  Lesser expensive options with a diverse supply of streaming video now makes the choice to cut the cord easier to make.  Digital has changed the playing field and it is time to rethink the cable bundle. 

Stock Market Worried About Cable Networks

When Time Warner Inc. announced lower earnings expectations in the future, the stock market responded by selling off a list of cable network stocks.  From Time Warner to Discovery, from Disney and Viacom to AMC, a consistent sell off was evident.  But what drastically changed?  Just a week or so ago, ESPN cut 300 jobs to lower costs and hopefully improve earnings.  Cord cutting has been much discussed over the last number of years; in fact, many cable operators have been posting much smaller sub losses in their latest quarter.  And content companies have been pursuing new streaming deals and other revenue lines to boost earnings.  So what really changed?

Sure, the announcement that Time Warner Inc. now expected lower earnings in the near future. But just yesterday, its premium network HBO announced it was the new home for future Jon Stewart content.  And that news was positively received.  As to the daily price fluctuations of media stocks like Time Warner, Inc., the likely means to restore earnings will be to cut costs.  Expect some layoffs from a number of these companies to boost earnings for its stockholders. 

ESPN Cut Jobs, Others Will Too

300 ESPN employees lost their jobs last week, but they are not the first media company to do so.  While content matters, employees don't, and the ultimate bottom line, when you are a public company, is to appease the shareholders.  And when revenues don't rise, costs must be cut to sustain and ideally grow profits.  As The Godfather likes to remind us, "It's not personal, it's strictly business."

Truth is, it is personal and affects many individuals as well as their families.  While content costs rise, and sports content costs skyrocket, cord cutting has led to lost subscribers and advertising dollars have shifted from TV to digital.  ESPN made those same high programming cost deals while watching its base erode.  Its parent company, Walt Disney,  demanded that ESPN cut costs to support profit goals.  And while other networks have tried to recapture lost subs by offering OTT services, including CBS, HBO, Showtime, and most recently Starz, to name a few, ESPN has not because its license fee agreements could lead to cable operators dropping the service from their cable line-ups.

Its happened to in other media.  The Daily News in NYC is cutting writers and other personnel to keep afloat, too.  The sad truth is that this trend will only continue to mount as subscribers flee, costs rise, and the easiest way to make up the difference is to cut labor.  And while ESPN may be in the news today, other networks have done the same thing in other years and will continue to announce cuts in the near future.  It is not the end of job cuts, only the beginning.  For my friends at ESPN and at other networks, I can only hope that as this door closes, other opportunities open. 

Another Paid Streaming Service Joins The Mix

If you thought that cord cutting could save you money, think again.  The rise of so many streaming digital services could find yourself one day paying more for content then you were paying for cable.  With Amazon, Hulu, and Netflix each wanting you to pay $10 a month for their exclusive content, you can add a premium version of You Tube called YouTube Red.  Priced also at about $10 a month, do we see a price point that all these services like to reach, "YouTube Red will allow users to surf the site completely ad-free, across multiple sources, from desktop to mobile. Original programming and movies will also be available to YouTube Red subscribers, beginning next year. " This according to today's Multichannel News. 

And the more content you want, the more you will pay.  Last week, NBCU announced the launch of Seeso, a digital streaming content service that will cost about $4 a month.  It will include NBC shows as well as some original comedy content.  You might also decide you need HBO Now to assure you are receiving Game Of Thrones and other HBO content.  That will set you back another $15 every month.  If you like that, you may decide to add Showtime Now at $11 more a month.  And while Disney doesn't have a pay streaming service in the US, they are just announcing one to launch in the UK, per Variety.  And while there are still a number of free video content services, it is easy to see that the more content we want, the more we have to pay for.  Sorry, no bundling in the world of digital streaming. 

So lets add up what we know.  Netflix, Amazon Prime, and Hulu costs $30 a month for all three.  YouTube Red is $10, Seeso is $4, HBO Now is $15 and Showtime Now is $11 for a total of $70 a month for the 7 services.  Add your favorite music streaming service, Apple Music, Pandora, Spotify, and watch your dollars fly out of your wallet.  Our cable bill could one day look like a steal. 

Undateable Shows Live To Catch Viewers

There is something about live television that works.  Perhaps it is reminiscent of the Golden Age when TV was learning its craft and partly the notion that with live TV comes the danger of mistakes and unknown outcomes.  Live has made Saturday Night Live a better comedy show able to capture the latest news into its broadcast and deliver immediate outcomes.  And the format is being used at 8pm on Friday Nights with the show Undateable.

A serviceable comedy from creator Bill Lawrence, the series in its third season has decided to broadcast Live to create a more lively product.  The set looks like parts of the old Cheers set, and hopefully the magic pays off for Undateable.  The jokes are a bit lame but the writing incorporates the jokes of being live with breaking the fourth wall and of course mistakes from flubbing lines.  But somehow, it all seems to work.  The show is fun to watch and the cast seems to like the danger of live TV.  Music and special guests inhabit the bar to make a breezy comedy.  The hope is that the plots continue to tighten and the second bananas on the show further shine to create a more complete ensemble.  Overall, broadcasting the show live has raised the bar and the potential to becoming a better show. 

I will watch but I worry that shows I like tend to get cancelled.  I can only hope that this show is one of the exceptions. 

Content Verse Distribution Battle Continues

The proverbial chicken verse egg is very much in play when it comes to the world of media and the question of which is more important, distribution verse content.  Today, the stock market seems to think less of content creators as those media companies, from Disney to Fox to Viacom have all suffered due to cord cutting.  For the moment, distribution, or to be more exact, the distribution disruptors, are leading the current battle.  The rise of Netflix and Hulu and Amazon, the threat of Apple entering the content subscription business, and increased usage of devices like Roku, Chromecast, Apple TV, and other OTT boxes are threatening the cable license fee model.  Consumers still want content to watch; they just don't want to pay much for it.

And so low cost distribution platforms provide content choices for less.  A Netflix subscription for under $10 a month.  An HBO subscription WITHOUT a cable subscription, Amazon Prime with free shipping and tons of content to watch.  All cost less than an annual cable subscription.  And if video content companies are getting less revenues, than profits will only drop, despite additional cost cutting. 

Of course the content v. distribution model is essentially a balancing act, one that will find a new middle ground as some cable channels fall away and we find clearer programming segments.  We no longer watch channels, we watch shows and that also affects our search efforts.  Channel surfing has lessened as broadband enables us to search specific attributes to find shows and movies to watch.  From a certain actor or actress to key word search, the need to keep pushing channel up or down is no longer necessary, especially as content goes online. 

Content is ultimately king in my book; but for the moment, broadband distribution exclusivity may be driving the bus for the moment. 

Are There Just Too Many Cable Networks

How many slices of a pie can you make before the serving size gets too small?  Cable operators have impressed us with the number of channels they offer, creating value in aggregating so much content for one low price.  But with the advent of on demand programming and the rise in streaming, channels have become a bit dated.  Asked to define a network by the shows they offer and you can become glassy-eyed trying to figure it out.  As viewers, we simply want to watch and aggregators like Netflix allow us to watch our Mad Men and other shows without caring what "channel" it is on.

Companies with multiple channels under their ownership air shows across those channels to gain audience interest.  Most recently, the Jim Gaffigan Show appeared not only on TV Land, but Comedy Central as well.  These networks are owned by Viacom.  Other media companies have followed similar strategies.  Orphan Black was seen across AMC Networks and BBC America Channels. 

 With so many channels asking for license fees, cable operators realize they now must cut back to save on costs.  Viewers watch shows, not 'channels' these days, and aggregators like Netflix, Hulu, and Amazon are capturing consumers with a single source for watching episodes or movies.  No channel names involved.  And so it may be time to consolidate and drop channel brands.  Channels have become too fragmented so that no one network has a sufficiently unique brand. Channel individuality has been lost as each tries to reach the same demographic to drive advertising sales. 

Cable operators realize too that a skinnier bundle with less channel offerings, combined with on demand and streaming capability through their menu, will keep price points more attractive and subscription from dropping. 

It may now be time for the media industry to drop nets and better segment their brands.  Can MTV and VH1 be combined, Can A&E, History, and H2 become one brand; Can IFC, Sundance, and BBC  be combined.  Could TBS, TNT, TruTV become one brand?  And will independent networks like GSN, Ovation, WFN, and others find that they will also fall off the cable line-up.  It might just be time to watch network fragmentation evolve back into fewer more sustainable brands.  r they might go away altogether ac consumers cut the cord to cable TV and seek only their programs on other aggregator platforms. 

It's The End Of The Bundle As We Know It

With apologies to R.E.M., it looks like the end of the bundle as we know it (and I feel fine).  Prophetic perhaps, but the stock market these last couple of days sure feels like the bundle today is broke and that media companies will be the losers. 

For cable, the bundle was originally laughed at when Cablevision first introduced a triple play bundle of cable, phone, and broadband for under a hundred dollars a month.  And with an assortment of cable networks, consumers felt like they got a good deal.  Other cable companies scoffed but soon found themselves following along as it proved to be a very successful marketing strategy.

Fast forward almost 20 years and cable subscription fees have grown faster than inflation.  Cable operators kept aggregating more and more networks to their line-up and license fees of all networks kept rising.  And so did our cable bills.  We may have enjoyed the wide variety of programming and the rise of on demand viewing, but we were also inundated with more and more commercials.  For consumers, a breaking point was near and the solution has been cord cutting.

But in order to enjoy content, alternatives also had to be found.  The quantum leap happened as Netflix emerged with a broadband streaming solution at a price point of under $8 a month.  Amazon Prime, Hulu, and others saw a shift occurring and have found a way to attract viewers with low fees, syndicated and well known content, and as to really entice viewers, original content to drive adoption.  For price/value, cable was losing the race.

Unfortunately cable networks are not about to lower their license fees that they charge operators.  So cable operators have now started to drop networks off their basic line-up and create skinnier versions at lower costs.  For some cable networks, it is a double hit; lost subscribers first due to cord cutting, and second, drops in their subscriber base due to being dropped from basic levels of service.  With lower subscriber bases, advertising revenue creates a third hit to the networks bottom line.  Verizon FIOS has announced such a move and Charter Cable is not far behind.

Today, the bundle is not the technology choices; we have essentially watched as the triple play can essentially be managed through the broadband fiber with web, streaming, and VOIP.  The bundle is now the aggregated content that we are consuming across our devices.  And price elasticity is playing a huge part.  AT&T, now with DirecTv in its stable, is trying its own bundle of cellular and satellite to drive subscription.  Netflix, Amazon, and Hulu continue to advance with more original content to their bundle of content. 

Media networks that own their content should find that they will survive cord cutting with more platform alternatives to place their content.  And branded opportunities within the content will drive forward more advertising revenue as well.  For cable operators, the bundle as we know it has changed; Driving value of the fiber pipeline to the home, services that rely on the broadband pipe, and TV Everywhere content accessibility at more competitive price points will keep the business thriving.