FCC Takes Aim At The Pathetic Lack Of Cable Set Top Box Competition

from the killing-sacred-cash-cows dept

The FCC has formally declared war on the outdated, over-priced traditional cable box. The agency has put forth a new proposal (pdf) for guidelines intended to bring much-needed competition to the cable set top box market. As recently noted, data collected from the top ten biggest cable companies found that 99% of cable customers still rent a cable box, paying $231 in fees annually for often-outdated hardware that's frequently worth very little. This cozy little captive market nets the cable industry roughly $20 billion in rental fees every year.

In a public sales pitch for the proposal over at Recode, FCC boss Tom Wheeler invokes the spirit of ma bell to highlight the absurdity of the cable industry's continued control over the set top box market:

"Decades ago, if you wanted to have a landline in your home, you had to lease your phone from Ma Bell. There was little choice in telephones, and prices were high. The FCC unlocked competition and empowered consumers with a simple but powerful rule: Consumers could connect the telephones and modems of their choice to the telephone network. Competition and game-changing innovation followed, from lower-priced phones to answering machines to technology that is the foundation of the Internet."

The FCC wants to design a software-based solution that lets consumers access cable content via the hardware of their choice. Hardware that, thanks to competition, would be better, cheaper and faster than the clunky old cable boxes we all know and love. The FCC's careful to state it's not mandating a specific standard by which cable operators have to provide programming data to these devices, stating they simply need to adhere to "any published, transparent format that conforms to specifications set by an independent, open standards body."

This isn't the FCC's first attempt to force competition on the set top box market. CableCARD was the agency's earlier, ineffective attempt to mandate a standardized card for use in third-party set tops. CableCARD regulations were well-intentioned but cumbersome, and frequently left unenforced. The cable industry also went out of its way to avoid pitching the cards to consumers, and often made the installation process as cumbersome and nightmarish as possible. When meager CableCARD stats were released annually, the cable industry would then collectively shrug and insist low adoption reflected a genuine lack of interest in the idea of better third-party devices.

With $20 billion in set top box revenues on the line, the cable industry has spent the better part of a decade fighting tooth and nail to kill this FCC proposal and anything like it. Opponents including AT&T, the MPAA, and the cable industry's biggest lobbying organization today formed what they're calling the "Future of TV Coalition," which argued in a release that greater set top box competition will kill diversity programming, hurt consumer privacy, embolden pirates, and generally just destroy the known universe:

"Many parties, including 30 members of the Congressional Black Caucus, have warned this would unravel the modern TV ecosystem, doing particular damage to small, independent, and diverse programmers and the communities they serve. AllVid would also undermine vital privacy and other consumer protections that apply to pay-TV providers but not the tech firms advocating adoption of AllVid. And it would erode protections against video piracy, rendering programming less secure."

Of course that's bullshit, and what the industry's really afraid of is seeing a cornerstone of its uncompetitive walled-garden empire demolished by real competition. Granted it's worth noting that the FCC's proposal doesn't prevent customers from keeping their existing cable boxes, nor does it stop cable providers from providing them. In other words, if the cable industry wants to retain customers on its systems, all it has to do is innovate and compete.

All of that said, you can't begrudge those who look at the CableCARD fracas of the last decade and legitimately wonder whether the FCC has the chops to actually implement and enforce such guidelines with an election (and potential FCC shuffle) looming. It's also worth asking if another multi-year enforcement fight is worth it with the cable industry on a collision course with Internet video and irrelevance anyway. Whatever happens, it's at the very least amusing to see a former cable lobbyist nobody expected much from plunge a dagger into one of the cable industry's largest and most sacred cash cows.

Filed Under: allvid, cable, cable tv, cablecard, competition, fcc, set top box

56% Would Drop ESPN In A Heartbeat If It Meant Saving $8 A Month On Cable

from the goodnight,-sweet-dinosaurs dept

Over the last year, ESPN's decision to laugh off cord cutting has truly come home to roost. The company has had to engage in numerous "belt tightening measures" after losing around 7 million subscribers in just two years. Where are these subscribers going? Many are cutting the TV cord entirely. Others are opting for so-called "skinny bundles" that pull pricier channels like ESPN out of the core cable lineup, moving them to additional, premium channel packs. Companies like Verizon that have experimented with skinny bundles have been rewarded for their efforts with with lawsuits from ESPN.

But there's every indication things will be getting worse for our friends at Disney and ESPN.

A new study commissioned by BTIG Research and analyst Rich Greenfield (registration required) found that 56% of those surveyed would happily ditch ESPN if it meant saving them $8 a month. 60% of females say they would ditch the channel for the $8 discount, while 49% of males would do the same. And while ESPN could pursue a standalone streaming service, 85% of those polled say they wouldn't subscribe at $20 a month, even if it bundled in all of the additional ESPN channels such as ESPN 2 and ESPN 3.

And there are some additional problems with ESPN pursuing a standalone streaming platform. ESPN's recent lawsuit against Verizon revealed that many of the channel's contracts with cable operators restrict them from breaking ESPN out of the core cable bundle; a provision that is nullified if ESPN offers a streaming version of its own. So ESPN could accelerate its own evolution in the face of cord cutting and go straight to consumers, but (at least initially) it would greatly accelerate the company's losses as more cable operators pull ESPN out of the core channel lineup.

The problem is effectively that ESPN has enjoyed more than a decade in an artificial bubble, where, thanks to the inflexibility of cable offerings, users were stuck paying for a channel they never watched. In that bubble, ESPN had no real motivation to adapt, and now the check is coming due thanks to internet video. But with the playing field changes, Greenfield's quick to note that even as a standalone option, there's simply no way that the financials work out (at least nowhere near the level ESPN's used to):

"The reality is that ESPN would likely have to charge dramatically more than $20/month/sub in a direct-to-consumer model, given the dramatic reduction in penetration rates..."The math for a direct-to-consumer offering for a basic cable network does not work, especially for channel(s) with very high monthly fees embedded within the current MVPD bundle. Disney cannot take ESPN direct-to-consumer and they know it, whether they admit that publicly or not. Furthermore, if the multichannel video bundle frays faster than expected and the TV ad market continues to weaken, ESPN's future growth prospects are dim, at best."

As The Weather Channel can attest, there's obviously going to be some casualties in the cord cutting revolution. As some companies like The Discovery Channel have been realizing, one way to ensure customers don't flee under the new paradigm of consumer is to focus on quality, a mysterious new frontier for broadcasters used to getting paid an arm and a leg for delivering the bare minimum.

Filed Under: a la cart, bundles, cable, cable tv, cord cutting, streaming, tv
Companies: disney, espn

Canada Prepares To Force Cable Companies To Provide Cheaper, A La Carte TV

from the forced-adaptation dept

In March of last year, Canadian regulators announced they were combating high TV prices by trying something new: forcing the country's cable companies to offer "a la carte" (pick your own individual channels) TV. The CRTC's full ruling declared that by March 2016, all Canadian TV providers must provide a $25, discounted base bundle, letting users pick and choose individual channels beyond that. A la carte has long been a popular idea in both Canada and the States, where in the latter users receive on average 189 channels -- but usually only watch about 18 of them.

But while both Canada and the U.S. have long had an on-again, off-again love affair with the idea of a la carte TV, the pay TV industry has long argued the idea would damage the economics of pay television, eliminate jobs, kill off smaller niche channels while driving up prices and confusing customers. The problem is that niche channels are already dying; cable operators looking to battle tightening margins have dropped lower rated options like The Tennis Channel or The Weather Chanel. And prices, as you may have noticed, are skyrocketing at an unsustainable rate.

While U.S. regulators bought the industry's argument and backed off a la carte inquiries, Canadian regulators didn't, and their choice will be interesting to watch. It's effectively an attempt to force evolution on an industry caught in an unsustainable price-hike death spiral. And as the March deadline gets closer, Canadian cable and broadcast industry reps are begrudgingly admitting that the idea may lower rates for some Canadian TV viewers, but not if they enjoy sports:

"Clearly the most expensive [channels] will always be sports," says (Gary) Pelletier, president of the Canadian chapter of the Cable & Telecommunications Association for Marketing. "At the end of the day, for sports watchers, their cable bill will probably stay the same or increase, maybe.... In the case of someone who doesn't watch any sports at all, their bill will probably decrease."

In contrast, independent analysts have predicted that the average Canadian consumer will save anywhere from $5 to $21 per month. But Pelletier and the cable industry are quietly confident because they know that even if they lose money on tightened cable TV margins, they can always extract their pound of flesh by squeezing usage-capped Canadian broadband subscribers harder:

"While some consumers might be tempted to drastically reduce how much they pay for TV, Pelletier warns it could cost them in another way. Supplementing a slimmer cable package with a streaming service or two could increase data charges, Pelletier says. Plus, you may have to surrender any discounts you get from bundling cable with home phone, internet and/or wireless service. "If you cut your cable, then your internet is going to go up," predicts Pelletier."

And by "predict," Pelletier (whose organization is stocked with North American cable companies) means that's exactly what cable companies will do. In other words, your TV bill will be lower, but your broadband bill will be higher. And nothing really gets fixed if regulators don't address the lack of competition in the broadband space that lets usage caps (a glorified price hike) thrive in the first place. That's why this sort of thing could prove to be a regulatory slippery slope, when the easier path might have been to keep the focus on broadband competition -- and just wait for traditional cable service to slowly implode in the face of the cord cutting revolution.

Filed Under: a la carte tv, cable, canada

DSL Users Still Can't Get Advertised Speeds They Pay For, Nation's Telcos Couldn't Care Less

from the underwhelming-you-is-our-forte dept

Every year the FCC is mandated by Congress to release a report detailing the status of the U.S. broadband industry. The good news? This year's edition of the creatively-named "Measuring Broadband America Fixed Broadband Report" (pdf) notes that speeds have by and large tripled since 2011. The bad news? That's really only for those who have cable broadband (where DOCSIS upgrades are relatively inexpensive) and the few people living in an area getting wired with fiber to the home. If you're a phone company customer with a DSL connection, unfortunately, many of you are still lucky to get 12 Mbps downstream:

" Largely spurred by the deployment of enabling technologies such as DOCSIS 3, the maximum advertised download speeds offered by ISPs using cable systems increased from 12-20 Mbps in March 2011 to 50-105 Mbps in September 2014. However, popular maximum DSL speed offerings have not kept up with that growth. While average DSL consumer speeds have increased, popular maximum DSL speed offerings have stayed largely stagnant since 2011, with most DSL providers offering maximum download rates of 12 Mbps or less."

And that 12 Mbps mark is rather generous. There are tens of millions of DSL customers who are lucky to nab 3 Mbps downstream on a good day, thanks to phone companies that face no serious competitive incentive to upgrade. Worse, some of these companies (like AT&T and Verizon) are actively trying to drive these unwanted customers away with apathy and price hikes so they can focus on more-profitable wireless. Others, (like Frontier, Windstream and CenturyLink) are buying these aging assets up, but wind up being so saddled with debt meaningful upgrades aren't possible (assuming they had competitive incentive to do so).

For a few years now the FCC has taken to naming and shaming ISPs that fail to deliver advertised speeds as part of the report. And for a while, it paid dividends. Cable companies singled out in the report one year for poor performance (like Cablevision) would return the next having notably upgraded provisioned speeds for fear of bad PR. Even notoriously awful satellite providers, motivated by 4G wireless, have been improving things with new Ka-band deployments. But proudly, consistently, the nation's DSL providers continue to under-deliver in terms of both overall speed......and also how close they get to their advertised speeds:And this won't be changing any time soon. With no competition to speak of, most of these telcos intend to cherry pick only the most profitable areas over the next decade (housing developments, university dorms), then pretend these deployments are much broader than they actually are (aka "fiber to the press release"). Simultaneously, most of these underperforming telcos (CenturyLink & AT&T especially) have been busy lobbying, buying and quite-literally writing state laws preventing towns and cities from upgrading their own broadband, or from getting outside help in the form of public/private partnerships.

The result (despite a lot of hype surrounding gigabit deployments) is a huge swath of the country that will likely be stuck on last-generation DSL for the better part of the next decade. And while a lack of real broadband competition is the obvious culprit, these same companies will be sure to blame everything from net neutrality to rogue yeti for their miserable failure to provide even the barest semblance of mediocre service.

Filed Under: broadband, broadband speeds, cable, competition, dsl, fcc
Companies: at&t, centurylink, frontier, verizon, windstream

The Cable Industry's Response To A Banner Year For Cord Cutting? Massive Across The Board Price Increases For 2016

from the pouring-gasoline-on-a-house-fire dept

2015 was the year cord cutting stopped being written off as fringe behavior and truly went mainstream. 23% of consumers engaged in "cord trimming" in 2014 (reducing their overall package where they could), while 16% said they had unsubscribed from pay-TV services in the past year. Billions in stock value evaporated in a flash as Wall Street realized cord cutting wasn't a fad. in 2015, 4.9 million consumers called themselves former cable customers, a tally that's expected to jump 12.5% in 2016. Consumers are finally tired of paying an arm and a leg for bloated channel bundles, when they only watch, on average, about 17 of them.

Facing an unprecedented shake up in their industries and a dire need for evolution, cable and broadband companies are ringing in the new year the only way they know how: rampant tone deafness and major across the board price hikes starting in January. AT&T, Verizon, Dish, DirecTV, Comcast and Time Warner Cable are pummeling customers with $2 to $10 rate hikes for cable TV service in the new year. Not only are base channel bundles seeing a hike, but all providers are jacking up regional sports fees and so-called "Broadcast TV" fees:

"Comcast, the nation's largest cable provider, announced earlier this month that subscribers nationwide will see prices go up an average of 3.9 percent, and increases already have taken effect in some markets. The company will also hike its "broadcast TV fee" by 66 percent from $3 a month to $5. This relatively new fee covers the cost of retransmission fees that over-the-air broadcast TV networks like CBS, NBC, ABC and FOX charge cable companies for redistributing their networks on pay-TV systems."

Those retransmission fees are simply the cost of doing business (read: the cost of programming). But cable operators have started breaking a portion of these costs out below the line in order to misleadingly keep their advertised rates low. In other words, fees like this are why your already absurdly expensive cable rate is usually significantly higher once you actually get your bill.

As all cable operators are quick to do, they cry to the media, stating they too are simply victims of the soaring cost of TV programming nobody seems able to do anything about:

"Cable and satellite companies say the higher prices cover some but not all of the higher programming costs. The amount that Time Warner Cable pays local broadcast channels has risen 85 percent in the past two years, while its costs for carrying sports networks have increased 116 percent since 2008, according to spokesman Bobby Amirshahi."

While it's true many cable operators (especially smaller ones) are finding TV profit margins tightening, there's a few problems with cable operators' faultless narrative. One, many companies like Comcast/NBC Universal are also broadcasters and -- like Time Warner Cable -- own the regional sports networks contributing to higher costs. More importantly, it's worth noticing that many of these cable operators -- the same ones breathlessly pretending to be consumers' friends on the issue of soaring programming rates and retransmission disputes -- are busy raising rates on most of their non-TV-related services as well.

For example, Time Warner Cable's going to be ringing in 2016 by jacking up the cost of cable modem rentals from $8 to $10 a month (if you're still renting a modem, do yourself a favor and buy your own). DirecTV's jacking up the cost of the company's "TV fee," which the provider's website (seriously) claims is a monthly equipment fee that "allows us to keep our monthly fees low." Most providers are also jacking up the rental costs of set top boxes, and even the fees charged to pay your bills in person or over the phone. That's before you even get to the relentless pursuit of usage caps and overage fees.

And to tie these new year rate hikes off with a bow, most providers insist on insulting their customers' intelligence by claiming these increases are about improving the customer "experience," ignoring most of these companies rank lower in customer service and satisfaction than any other U.S. industry or company. In other words, the cable and broadband industry plans to respond to a banner year for cord cutting by pouring gasoline on a house fire, highlighting why they're absolutely begging for a disruptive ass kicking in the new year.

Filed Under: broadband, cable, cord cutting, price increase, tv
Companies: at&t, comcast, directv, dish, time warner cable, verizon

No, WSJ, Baseball Revenues Don't HAVE To Come Down Due To Cord-Cutting

from the new-baseball-business-models dept

As a Techdirt reader, the business of professional baseball is not required reading. That said, for many reasons, the baseball business aligns nicely with many of the topics we discuss here, and baseball in general is probably the math-iest of sports. That's why it seems necessary to push back on this Chicken Little piece at the Wall Street Journal, which claims that the laughably large baseball contracts players are signing today are doomed to drop precipitously because of cord-cutting.

At first blush, the premise here might even seem reasonable.

But there is one question looming over the sport, even as it indulges in another no-holds-barred cashapalooza. Salaries in baseball have been rising without fail ever since the advent of free agency in 1975. But for the first time, there are real warnings from responsible people that the party may be coming to an end.

As more people downgrade their cable service for smaller bundles of channels, or “cut the cord” by disconnecting from cable in favor of online streaming services, or just decline to ever subscribe, the economics of baseball will take a hit. MLB teams will no longer be able to ask cable services to pay a premium for the right to show their games. If they can’t find other sources of revenue to make up for this, it’s hard to imagine salaries to escalate at this rate in perpetuity.

The qualifier built into the premise is the premise's undoing. "If they can't find other sources of revenue" with regards to broadcast contracts, amounts to, more generally, "If baseball doesn't make as much money they won't pay the players as much." Well, yes, obviously. The problem is that no professional sport has positioned itself as well for cord-cutting as has Major League Baseball. As we've discussed at length in the past, MLB's Advanced Media product is the gold standard in sports streaming, so much so that other sports leagues are actually piggy-backing off of the MLB.TV product for use in their own sports. In addition, while the WSJ presents all this as some kind of surprise doomsday on the near horizon, MLB has been prepping for this for some time. We've already seen the league and its teams embrace streaming options with the current broadcast partners, as well as look to end the old blackout rules that would hamper streaming availability. What the WSJ piece attempts to paint is a picture in which it sees the doom coming, but MLB does not and is blithely handing out huge player contracts unwittingly. Baseball has done nothing to demonstrate that kind of ignorance, though, and in fact has done everything to demonstrate instead its willingness to be out in front of cord-cutting.

Vince Gennaro, the director of the graduate sports management program at Columbia University, said he wonders if the current deals between teams and cable services are sustainable. “These are major strategic issues that the consumer is going to have a large vote in,” he said, adding that he is not sure that baseball’s regional networks have an accurate view of the threat they’re facing. “Are the networks reading the market right? Are they reading the consumer right?”

Valid questions, but not when it comes to MLB revenue and player contracts. There is nothing in the cord-cutting trend to indicate that baseball viewership is going away. And the viewers are all that matters for revenue purposes. In fact, the cord-cutting trend has quickened as sports streaming becomes more widely available. That would seem to indicate that fans are simply trading television broadcasts for streams which, while it may hurt the local broadcast partners, presents no reason why it should hurt revenue overall, thereby affecting player contracts.

In the end, the article does a lot of hand-wringing over the questions it itself is asking, and yet the league and teams are moving forward confidently. That should tell you everything you need to know about whether or not the league is prepared for cord-cutting.

Filed Under: baseball, cable, cord cutting, revenues, streaming, tv
Companies: mlb

Cord Cutting's Not-So Imaginary Any More: One Fifth Of Consumers Could Ditch Cable TV Next Year

from the not-just-a-river-in-Egypt dept

While cable industry executives are still intent on claiming cord cutting's either a mass hallucination or a fad, data suggests that ditching traditional TV for Internet video is gaining steam. A new study by PwC (PricewaterhouseCoopers) indicates that while traditional TV customers get 194 channels, they only watch, on average, about 17 of them. And while the study found that 79% of US consumers subscribe to some form of traditional pay-TV, 23% said they engaged in "cord-trimming" in the past year (reducing their overall package where they could), and 16% said they had unsubscribed from pay-TV services in the past year.

And there's no mystery as to why this is happening. The full PwC study notes that cost (pdf) is the primary reason:

"Cost is an unavoidable aspect of consumer decision making—and the most important factor for cord-cutters. 57% of cord-cutters say they choose not to subscribe to cable because “the monthly costs are just too high."

Behind cost, also unsurprisingly, comes annoyance at the lack of control and flexibility in most cable packages:

"When asked what would entice consumers to re-subscribe to pay-TV, 56% identified “being able to customize my package to exactly the channels that I want” as their number one motivator. And this sentiment is not exclusive to cord-cutters: 45% of current pay-TV subscribers said they most preferred an “a la carte” package of channels that they could customize themselves."

And that's nothing new. Consumers have been begging for more flexible and cheaper programming options for fifteen years or more. Historically, the cable industry's response has been that a la carte TV is impractical because it would demolish the existing pricing model, cause higher rates, and force less-watched channels off the air. But all of that's happening anyway. And while a la carte TV was portrayed as a bogeyman, the industry was busy fighting off any pricing innovation of any kind. In fact, it has taken fifteen years of sustained bitching just to get a basic channel bundle without ESPN in it.

The end result is obvious. The PwC study notes that last year, 91% of consumers said they could see themselves subscribing to cable in the following year. This year, that figure dropped to 79% as a growing number of Internet alternatives began to emerge. In other words, the firm believes that one-fifth of consumers could ditch their cable subscription in the next year now that they have some alternatives to switch to. A similar study last week by eMarketer makes the same point with a slightly longer timeline, claiming that one in five homes will no longer subscribe to traditional television by 2018:

"In 2015, there will be 4.9 million US households that once paid for TV services but no longer do, a jump of 10.9% over last year. And that growth will accelerate in the coming years, with the number of cord-cutting households jumping another 12.5% in 2016. In fact, by the end of next year, the number of US households subscribing to cable and satellite will drop below 100 million."

While the slow and steady pace of the shift is what fed industry denial, it also means there's still plenty of time to do something before Internet video starts really demolishing legacy TV revenues. And it's not rocket science: offer just a little more flexibility at a notably better price point (and maybe try sucking at customer service just a little bit less). Instead, most cable and broadcast execs simply mumble something about the great value cable provides while keeping their heads buried deep in the sand, confident they can lean on broadband usage caps to counter any lost TV revenues down the road.

Filed Under: broadband, cable, cord cutting, internet, tv

AT&T, DirecTV Deliver 'Merger Synergies' By Raising Rates In Perfect Unison

from the synergistic-efficiencies dept

You'll recall that when AT&T was trying to justify its $69 billion acquisition of DirecTV, it rolled out all the usual claims about how the deal would have immeasurable benefits for consumers. Sure, the deal would technically eliminate jobs and a pay TV competitor from an already competitively-stunted market, but just think of the potential synergies! And as the two companies begin to fuse operationally, these amazing synergies have started to materialize -- in the form of new rate hikes imposed by both companies on exactly the same day.

Claiming the hikes are due to an "improved experience" for consumers, AT&T has notified its U-Verse TV subscribers that they can expect $2-$4 price hikes on all the company's TV packages, $2 price hikes on the company's voice services, as well as a notable bump in most of the company's sneaky, below-the-line fees -- used to jack up the advertised cost of service post-sale. That includes a bump in AT&T's "Regulatory Video Cost Recovery Charge" (which isn't government mandated and is entirely misleading) and its "Broadcast TV Surcharge" (which is just part of the overall cost of programming buried below the line).

DirecTV is simultaneously informing all customers of their own rate hikes on January 28, including a $2 to $8 bump in most TV packages. Users also get to enjoy a bump in DirecTV's monthly "TV fee," amusingly explained as such on the AT&T website:

"As technology becomes more advanced, monthly fees for receivers and Genie Minis allow us to provide the latest equipment with minimal upfront cost to the customer. The upgrade fees allow us to keep our monthly fees low. Many leased items require an upfront payment as well as monthly fees. Similar to leasing a car, a customer pays an amount upfront, and that amount allows the customer and the company to keep the monthly fee low."

Yeah, that's a company increasing a fee it claims exists to protect consumers from higher fees.

Note, of course, that AT&T repeatedly stated pre-merger how the merger with DirecTV would give them greater leverage with broadcasters than ever before, allowing them to negotiate lower rates for programming. Unmentioned, of course, was that those dramatic price reductions would be pocketed and not passed on to consumers. Amusingly, the only place the two companies are lowering rates is the cost of HBO, which they've had to drop from $19 to $15 thanks entirely to competition from HBO's standalone streaming video service, HBO Now. Hopefully there's more price disruption from where that came from.

AT&T was fortunate in that consumer ire toward Comcast's own bad deal allowed the AT&T DirecTV deal to fly under the radar. And since the FCC saw fit to approve the deal with largely meaningless conditions, the mega-merger (which the FCC claims somehow served the public interest) doesn't appear to provide any real benefits to consumers at all. And to think, we haven't even gotten to the point where AT&T begins to fire tens of thousands of employees to synergistically improve operational efficiencies!

Filed Under: broadband, cable, merger, price hikes, synergies, tv
Companies: at&t, directv

One Slightly Less Shitty Quarter For Cable Fuels Renewed Cord Cutting Denial

from the head-in-sand dept

First the cable and broadcast industry argued that cord cutting didn't exist. It was, to hear execs tell it, simply a reflection of the sagging housing market, and the people who were cutting the TV cord were poor, 40 year old nobodies, living in their mom's basement who didn't matter. Of course data has since shown that cord cutting continued as housing markets recovered, with millions of new home owners not signing up for cable. Similarly, most data shows that cord cutters are young, educated, and just tired as hell of constant rate hikes for mammoth bundles of awful reality TV programming.

After a record-setting second quarter for cord cutting, the cable industry seemed prepared to accept cord cutting (and as a result embrace new, skinny bundles of channels and the reality that it may actually have to someday compete on price). But subscriber TV losses during the third quarter sucked slightly less than normal. That, in turn, fueled a new industry press meme about how Internet video's threat to cable was "overblown," cable has "struck back" and it's time to "change the narrative," because cable, like, has things totally under control now:

"It’s time to change the narrative about cord cutting,” Craig Moffett, an analyst at MoffettNathanson LLC, said Thursday in a note titled “Charter Q3 Earnings: Cable Strikes Back.” “Yes, the pay-TV industry is slowly drip, drip, drip declining,” he said. “That cable was actually holding its own was at best a secondary narrative."...The third-quarter resurgence after a disastrous summer quarter of record subscriber losses was led by Comcast, the nation’s largest broadband Internet service provider."

So what did Comcast do to encourage this suddenly rosy outlook among many stock jocks? Why the country's least liked company lost just 48,000 subscribers last quarter. That's still notably pathetic, but it excited Wall Street because it was Comcast's best subscriber showing in nine years (which again, speaks volumes). Time Warner Cable saw similar "improvement," losing just 7,000 subscribers last quarter. Other third quarter earnings results were all over the board, from AT&T's loss of 92,000 U-Verse subscribers (great job!) to Charter managing to add a whopping 12,000 video subscribers (wow!).

And while this narrative of cable "striking back" and cord cutting being a hallucination of a few, mean 'ole bloggers is a great one for firms pushing specific stock positions, news outlets and analysts nervously sucking at the teat of dwindling industry ad money, or executives with their heads buried deeply in the sand, it misses the forest for the trees.

One, many of these companies just finished new gee-whiz set top box GUI upgrades (notably Charter, Time Warner Cable and Comcast). And while some graphical upgrades for the aging cable box may have excited customers temporarily, they're in no way going to be a substitute for the direction the cable industry absolutely needs to head: lower prices and more flexible channel packages. Netflix is now in half of all american homes and the impact on cable ratings has been abundantly obvious. And while several cable companies are finally experimenting with new "skinny" channel bundles, they're still not seriously competing on price. As a result these offerings tend to lack value, features, and, in cable industry fashion, are jam packed with fees and caveats.

A slightly less shitty quarter also doesn't change the fact that the housing market continues to grow without bringing new cable subscribers along for the ride. Nor do these numbers address the arguably bigger threat of "cord shavers," an admittedly idiotic term that includes users who are trimming back on their cable TV and service bundles to counter absurd programming rate hikes. Flat cord cutting numbers are just one metric to look at. Looking at all of the data, including ratings, housing growth, and cord shaving paints a very clear picture that Internet video is a serious threat that's not going away.

To be sure, much cord-cutting analysis and press coverage tends toward the apocalyptic, and over-states both the pace and scale of the problem. It's also true that cable could likely swat cord cutting like a pesky fly were the industry interested in things like actual innovation, competing on price, and disruptive new, open viewing platforms and hardware. But it's pretty abundantly clear looking at consumer bills and customer satisfaction surveys that the industry is interested in none of those things. Claims that one slightly-less-shitty quarter for a single statistic means the tide is turning sends the completely wrong message to an industry that needs to wake up and engage in aggressive adaptation before things get truly ugly.

Filed Under: cable, cord cutting, craig moffett, denial, tv
Companies: charter, comcast, time warner cable

Cable CEO Is Really Pissed That HBO Hasn't Cracked Down On Streaming Password Sharing

from the get-over-it dept

As HBO's streaming service popularity has taken off, the company has yet to crack down on the sharing of passwords, believing it's a great opportunity to have programming junkies market the brand for you. We all of course already knew that sharing HBO Go passwords was a violation of the anti-circumvention clause of the DMCA and an unholy sin. But according to Charter CEO Tom Rutledge, the sharing of streaming service passwords is also a diabolical theft of content that needs to stop immediately.

During the cable giant's recent quarterly earnings call, Rutledge decided to rant a bit about the perceived injustice of college students using their parents' passwords, insisting that HBO's leniency on this front showed a complete misundertanding of the market:

"But to Rutledge, companies like HBO show a "complete lack of control and understanding in the space" by letting password sharing continue, and it's something that must be stopped. "The lack of control over the content by content companies and authentication processes has reduced the demand for video because you don’t have to pay for it,” Mr. Rutledge said on the earnings call. “That’s going on in the college market."

But it's Rutledge who appears to have shown his lack of understanding of the market he serves. The CEO assumes that if you crack down on college kids sharing HBO passwords that these kids are magically going to go out and sign up for cable connections. What's more likely to happen should you crack down on the practice is that that these kids (most of whom are on a budget) will turn to cheaper streaming alternatives like Netflix -- or piracy. But in traditional legacy exec thinking, everybody's a criminal, even though Rutledge's company simply refuses to seriously compete on price.

Earlier this year HBO CEO Richard Plepler said the company keeps a close eye on the password sharing stats, and it's not really a significant number of people. Plepler (the guy Rutledge implies doesn't understand the market) a year earlier made it clear he understood the market perfectly well:

"It’s not that we’re unmindful of it, it just has no impact on the business,” HBO CEO Richard Plepler said. It is, in many ways, a “terrific marketing vehicle for the next generation of viewers,” he said, noting that it could potentially lead to more subscribers in the future. “We’re in the business of creating addicts,” he said.

So, whereas HBO thinks it's a good idea to turn the other cheek on a statistically insignificant practice to generate brand obsession, Charter (soon to own Time Warner Cable and Bright House Networks in a $75+ billion merger) thinks it's a better idea to treat college kids like criminals, and in the process, driving them to Netflix and BitTorrent networks.

Filed Under: cable, competition, hbo, password sharing, streaming, tom rutledge
Companies: charter, hbo