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LA Times

Cord Cutting Likely to Accelerate — Here’s Why

Mar 18, 2015  •  Post A Comment

The latest player to announce a big move into online streaming could turn out to be a game changer for the TV business. The Los Angeles Times reports that the upcoming “skinny” package of TV channels from tech giant Apple — details of which were reported earlier this week — is “expected to accelerate the unraveling of the pay-TV bundle.”

Apple, which is talking with ABC, CBS and Fox Broadcasting, among other programmers, is aiming to have its new product on the market in time for the fall 2015 TV season in September, the report notes.

“The proposed streaming service takes aim at the 10 million homes that have high-speed Internet and no pay television programming, along with customers who are fed up with high cable fees. Apple’s cachet and legions of loyal fans could make it one of the biggest threats yet to cable and satellite operators,” the Times reports.

In a research report this week, Cantor Fitzgerald analyst Brian White wrote: “Apple remains one of the few companies in the world that has the potential to transform the TV industry, and we believe consumers are ready for a change.”

The Apple offering is the latest entry in a crowded field of alternatives to traditional pay TV that already includes services from Netflix, Amazon and Hulu. Meanwhile, Sony is readying a TV service for PlayStation, and Dish Network has just launched its Sling TV online service, starting at $20 a month.

Apple’s new service is expected to be priced at about $30 a month, the report notes.

The Times adds: “The recent moves should help prompt cable and satellite TV providers to offer their customers smaller packages of services at lower price points to remain competitive. Consumers for years have been grousing about the high cost of subscriptions that include hundreds of channels they never watch.”

At a recent investor conference, CBS Chief Executive Leslie Moonves said: “The floodgate is now open. Clearly the bundle is changing. … The days of the 500-channel universe are over.”

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4 Comments

  1. Apple TV $30 a month. Amazon Prime, about $10 a month. Netflix about $10 a month. Throw in Hulu, CBS’s OTT, HBO’s OTT service, and suddenly, you’re paying about the same every month as you did cable.

    Better to just hook up a computer and antenna to your TV and stream most of what you want to see for free.

  2. Just to be clear, many cable companies pay huge fees to programmers every month like ESPN, Fox Sports, etc. These fees are calculated on a per subscriber per month basis. ESPN alone, (1) channel, costs somewhere in the neighborhood of $5+ per subscriber, per month. So, when a cable subscriber pays their monthly cable bill, $5+ of that bill is payed to ESPN by the cable company. And that is just (1) channel!! Nearly all cable programmers charge fees on a per subscriber, per month basis. So, if a large cable company has 14 million expanded basic cable subscribers and they all receive ESPN then that cable company would pay ESPN $70 million per month times 12 = $840 million a year and that is just (1) cable company!! These monthly fees are typically contractually bound to go up every year by the programmers!! Also, many cable companies are contractually bound to offer a suite of channels associated with that particular programmers lineup. In other words, most cable companies cannot pick and choose which channels they want to offer, a la carte style. If a cable company wants to offer MTV, then a company like Viacom, may force that cable company to offer VH1, CMT, Nickelodeon, etc. as a suite of channels. It is a all or none proposition by some of these programmers.

    Another programmer that just entered the market in the past few years are broadcasters like ABC, CBS, Fox, NBC, etc. For decades, these channels were available to cable operators for FREE just like individual people who can watch these channels for FREE using their antennas. Then the networks decided to start charging cable operators. That first year alone, these fees were maybe somewhere in the $.80 to $1.00 per subscriber, per month range. So, that equated to a $6 to $8 hike per subscriber, per month just for these channels, if you consider that most subscribers receive at least (6) to (8) off air channels. The year before, they were FREE!! This year, those broadcast network retransmission fees, in some cases, went up around 70% to 100%.

    My point is, you can scream about the high cable fees, when the real culprits are the programmers that are jacking their rates up at an alarming rate and cable operators are simply passing these skyrocketing fees on to their customers.

    So, as consumers continue to cut the cord and move to various streaming services, these programmers are not going to lose money. If they are not getting their money from the cable company, then they will get it directly from the consumer in one form or another.

    Maybe you should do a story on these programmers, their fees, and their contracts and then you would have a better understanding of what cable operators are dealing with.

  3. Les, I did have cable at one time, but I never watched any ESPN or their sister networks. Yet, I never had an option to NOT have it and to NOT pay for it. So, I bought a computer with a dual TV tuner card (so I could use it as a DVR) and hooked it and an antenna to my TV and cancelled Comcast. In less than 6 months, I had the computer and all associated periferrals paid for and haven’t spent a cent on TV for more than 3 years. And THAT is why people are cutting the cable.

  4. Scott, I am in total agreement with you. Prices are way to high and look like they will continue to go up year after year but in most cases it is the fault of the programmers, not in many cases, the cable operator. Granted cable operators could “eat” any price increases by programmers and start losing money or adjust their profit margins but we know most won’t do that. I was simply trying to explain why prices are so high and I understand consumers will look at other options based upon their viewing needs and bank account.
    The secret is getting programmers to offer a la carte programming contracts to cable operators instead of forcing cable operators to offer “a suite of channels”, passing a specified % of their customer base, and forcing them to add NEW channels months or years later because it is in the contract.

    My comments were directed at the article when they commented “customers are fed up with high cable fees”. I was simply trying to explain why they are so high and who customers should be directing their frustration at. It is the programmers who keep raising their fees year after upon which most cable operators will typically pass on to their customers. I am glad you found a solution that you are happy with.

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