Categories

Peak Cable

Paying for TV has been a curious consumer phenomenon. There was a time when TV was free to consumers. It was delivered as a broadcast over-the-air and paid for either by commercials (US mostly) or by taxes on viewers (Europe mostly). The consumers were delighted with the idea as it was far better than radio and radio was delightful because it was far better than no radio.

The process of convincing consumers to pay for something that used to be free was quite interesting. The first benefit to be articulated was that the quality of the picture would be much better. It would, in essence, be noise-free.[1]

The second benefit was an increase in the number of channels. VHF and UHF television would cover about three and 5 channels respectively while cable could offer dozens, many specializing on specific types of content like the Home Box Office (HBO) offering movies and ESPN offering sports only and MTV music videos and CNN news only.

The third benefit was fewer (or no) commercials for some of the channels. This was especially valued by fans of movies whose interruption by commercials was often detracting from the immersive value and continuity of the cinematic experience.

These benefits were very attractive during the 1980s, to the extent that about 60% of US households adopted cable. An additional group later adopted satellite-based pay-TV as the technology became reasonably cheap.

Screen Shot 2015-03-19 at 2.29.06 PMThese benefits were priced modestly but as the quality and breadth of programming increased, prices rose. An average cable bill of $40/month in 1995 is $130 today[2]. Some of that revenue went into upgrading the capital equipment in use (the plant) and some into paying for the higher production values. Yet more went to the sports leagues and their players whose business models increasingly depended on broadcast rights.

And so over a period of about 40 years, watching TV went from free to quite expensive. More expensive even than a family’s communications costs (i.e. telephone service.) That’s quite an achievement at a time when technology diffusions caused huge price reductions in other goods and services. Consider that the TV set used to watch the programming improved dramatically while decreasing in price over the same period.

Meanwhile, some of the benefits began to be less relevant. Commercials are more abundant than ever. Ad buyers spend about $60/month per household to deliver ads[3] The quality of the TV picture is actually worse due to compression than one might get with over-the-air digital broadcast. Finally, the abundance of channels is beyond anyone’s absorption rate. Those channels which used to be “pure” became polluted and undifferentiated as each tried to be the other.[4]

On top of these paradoxes is the fact that actual penetration of the service has been declining. As the graph above shows, Cable TV has declined (though Pay TV much less so). The industry has reached saturation decades ago and has not offered anything meaningful in terms of innovation.

Disruption theory suggests that once a product over-serves on meaningful bases of value creation (and underserves on value) it opens the door to disruption. Which leads me to ask not whether cable is past its prime but rather why it’s still around?

The answers are usually immediate and plentiful: conspiracies of monopolists, lobbying, back-room deals, lock-in of content and all kinds of other misdemeanors. To which I would say: You can fool some of the people all of the time and all of the people some of the time but you can’t fool all of the people all of the time.

So again, why have all the people been fooled all this time? Twenty years have passed since the industry reached saturation and prices keep rising. Today the average cable bill is projected to rise to $200/month by 2020.

My answer is that disruption is predictable. Users are cutting cords, the “uncabled” or “never-cabled” are a significant portion of the population. 13.5% of broadband households with an adult under 35 have no pay-TV subscriptions. 8.6 million US households have broadband Internet but no pay-TV subscription. That’s 7.3% of households, up from 4.2% in 2010.  Another 5.6 million households “are prime to be among the next wave of cord-cutters,” according to Experian.

The same phenomenon occurred with mobile vs. fixed telephony. For several years it seemed that mobile was sustaining to fixed or that fixed was immune due to lock-ins. The fixed telephone incumbents insisted that the data was inconclusive. Then the trickle of abandonment turned into a deluge. The quality of service for mobile kept increasing and, with data, it became clear that the mobile devices could unleash unfathomable functionality and value.

And so it goes. A business dies first slowly then quickly.[5] The exact timing is tricky because of the non-linearity of the phenomenon. It’s also hard to declare end-of-life since business zombies are very common. What is clear however is that the economics will change dramatically and the alliances between talent and distribution will shift to entrants and away from incumbents. The point when we will look back and say that cable was finished will probably come by the end of this decade.

Notes:
  1. This was in fact the birth of cable TV: a shared antenna for a community in an  electromagnetic shadow []
  2. a 6.1% compounded rate of price growth vs. a 2.4% rate of inflation []
  3. Implying that the TV “business” has a $200/household/month revenue model []
  4. A pursuit no doubt driven by seductive but toxic market research []
  5. ‘How did you go bankrupt?’ Bill asked.
    ‘Two ways,’ Mike said. ‘Gradually and then suddenly.’ –The Sun Also Rises (1926) Ernest Hemingway []
  • jeff g

    And all of this for a vast wasteland!

    • Walt French

      [deleted]

      • Ian Ollmann

        My kids would happily watch another 30 hours a week of TV and probably would then ask for the balance of the week to be delivered in Minecraft minutes. That this would leave no time for ponies would not enter into the calculation.

      • marcoselmalo

        What, you haven’t had touch screens mounted to the saddle pommels?

      • marcoselmalo

        The Electronic Hearth.

    • marcoselmalo

      I stopped watching TV when I was six months in the womb and taught myself to read, so you don’t need to tell me about the Wasteland. Hell, I read T.S. Eliot’s first draft, and he had to rewrite the damn thing based on my notes*.

      But I digress. I just wanted to say that one man’s wasteland is another man’s oasis. It’s too easy to dismiss it all as mindless entertainment pitched at the lowest common denominator. Yet, I bet if you tried, you could pick out islands of intelligence in that vast mindless sea.

      These recent developments in TV (including today’s report from Buzzfeed that Apple will be opening an ATV App Store and SDK) bode well for the creators of those islands and their audiences.

      *The Wasteland was originally written as a screenplay, but I told Eliot it would make a better poem.

    • zornwil

      90% of everything is crap.
      Books are a vast wasteland: romance novels, mindless serials, formulaic genre work…
      Movies, oh my God are they terrible, just action-oriented special-effects hype, bunch of crap.
      Gaming, yeah, sure flip an angry bird at something, that’s a good game…
      Or, put another way, every media has lots of great things and the fragmentation of media, given a vast and diverse pool of consumers, assures each of us will only even start to consider a small fraction. TV has been said to be in a Golden Age recently, what with the Sopranos, Game of Thrones, Mad Men, etc.. I don’t happen to agree with the assessment, if only because I think it takes a long period of time and perspective to then judge a “golden age” as such, but there’s little debate that there’s not a lot of truly well done shows on television just as in parallel there’s a flood of crap. As in any ubiquitous, widely consumed media.

  • Walt French

    I have a very immature theory of business evolution, that companies learn during competition to differentiate and then become monopolists in their own brand that doesn’t compete. Customers buy in for a variety of reasons, identity being an important one, but information/familiarity also prominent.

    These moats are good enough to extract the type of revenues you cite here but open the opportunity for new market disruption. (Or perhaps actual new market innovations are just so hard, and often risky investments, that they need a fairly well-defined target to be undertaken by profit-motivated people.)

    I posit that there’s a technology angle that needs to come into existence too, as a necessary precondition. Actually disrupting the cable monopolies needs independent distribution but as today’s Internet is largely delivered over the same wires, alternatives are like MVOs, relying on the same companies they’d displace.

    I don’t quite envision wireless spectrum supporting a disruption. But I WILL note that in the SF Bay Area we get a couple dozen OTA channels and smart repurposing of those could serve areas with fewer towers than cellular. Some mix of satellite, 5G etc could also come into play but net-net, these no longer seem like disruptions. More, sustaining changes.

    The battle lines are forming but I don’t yet see how the war will unfold. New producer economics? Unlikely. Ad supported distribution? Not for high-value shows that need cash. Seems like the status quo might change VERY slowly at first.

    • Bailout

      Great comment. Was curious — what does MVO stand for?

      • Walt French

        Thanks—I’m fixing it to show Mobile Virtual Network Operator—a company that has its own brand (eg Boost, Virgin, Walmart) but uses another’s radios & network.

    • djangograppelli

      Walt, pardon my ignorance, but I was under the impression that wireless data transmission tech was going to bring us to the point where we could have a fixed “data receiver” in our homes and the internet backbone companies could build a couple of “transmitters” in urban areas, eliminating the need for last mile ISPs and their coax/fibre to the home. Is this not coming up quickly?

      • Space Gorilla

        We’ve got that in Canada, not sure how wide the coverage is, but it’s in my area. Speed isn’t great, but it’s not terrible, anywhere from 2 to 5 Mbps. I think it’s essentially fixed LTE. There are two wireless services where I live. You do need line of sight to the transmitting tower though.

      • Walt French

        I make a related claim: that over time, we could have an arrangement such as you say.

        But I think it’s years out. Many competing technologies, very strong financial incentives to promote one’s OWN tech over possibly better alternatives, regulatory inertia.

        I like the idea of a wifi-type glow emanating from streetlights but think it’s quite a while until realization.

      • Space Gorilla

        Just as a bit more info on my other comment. The fixed LTE service in my area is 5 Mbps, you need line of sight to their tower, and it works pretty well through bad weather. What I have on my end is a receiver outside the house and an ethernet cable running from the receiver to our router, and voila! I have wifi throughout my house. It’s like satellite internet I suppose, but without the lag.

        All that said, if you’re actually in a town or city, the cable and phone company internet services are far better, the ‘hard line’ right into the house. What I use is for rural connections, there’s a lot of that in Canada, so we’ve had lots of federal grants and programs to get rural wireless internet happening.

      • marcoselmalo

        I’d really like to see this in Mexico, which is developing but still largely agrarian. Access would raise a lot of people out of poverty. I’ve met a lot of people down here who scrape by with a lot of ingenuity. If only they had access to tech knowledge and tools!

      • Space Gorilla

        It’s not a bad service. As long as I don’t think about what’s available from ‘hard line’ services in cities :) My understanding is it could be a lot faster, especially the newer fixed LTE service in my area, but it’s a question of slowly rolling it out and managing traffic on the network while they do that. The fixed LTE uses the existing cell towers, so they put their transmitter (omnidirectional I think) on towers that cover a wide area, I think the range is about 30 km, 18 miles roughly for the US folks.

        To put the quality of the service in perspective, you can use Netflix or Skype most of the time, but not all the time. It wouldn’t be practical for a photographer who has to upload/download/share multi-GB images all day long. But it’s going to get better over time.

      • http://www.swift2.blogspot.com Swift2

        Well, according to the Artemis guy doing all those cool demos, it will be. Since the same science works with Wifi, It wouldn’t be too hard for a municipal wifi to become a very fast internet indeed.

  • Walt French

    I recently saw the claim that all the labor-saving tech and social changes as we got wealthier over the last 150 years reduced our workweek by 30 hours and… have gone into TV. Voluntarily.

  • stsk

    There are some powerful forces at work which have kept the cable companies alive beyond their natural span. Not only are virtually all cable companies monopolies in their territories, but they are ALSO the primary high-speed internet monopoly providers, thus making it difficult for the disruptive internet entertainment channels to take hold and facilitate cutting the cords. These monopolies have been supported in a large number of states by state legislatures sucking at the Cable trough and paying them back by passing laws restricting municipalization of internet service.

  • santoscork

    Banging the TV has lost its schtick.

  • santoscork

    What’s $200/month by 2017 in mid 1980s dollars?

    • Rick van Vliet

      About $90

  • santoscork

    The eventual rise and fall of everything. TV is but one example. You just added validation to my claims.

    • zornwil

      What claims?

      • http://www.roundrects.com Alex Santos

        I wish I could remember. I am sure you have even forgotten by now. Anyway, after all this time, circa 4 months since your question, Apple is slated to deliver a new Apple TV. As of this writing it is still rumor.

        https://uploads.disquscdn.com/images/44b6fc4c17a9719bea65cb5483041e56df73ec6ea3a2e31a32e1cb8a48064a38.jpg

      • zornwil

        Thanks, though to be clear there’s nothing I have “forgotten” in this regard as the reason for the question was not seeing any claims in the first place: your statement is not preceded by anything else and was not at the time (otherwise would not have asked the question).

      • http://www.roundrects.com Alex Santos

        I went through this thread looking for any previous related comment I should have put up but came up blank. I can only assume that any preceding comment I should have made was not saved. Sorry about that, I wish I could remember my comments.

      • zornwil

        Very nice of you to try, no worries, thanks.

  • BoydWaters

    There is definitely some frog-boiling going on here.

    (my extended family accepts the $200 monthly cable bill as a matter of course, a fact of adult suburban life, along with the car payments and the mortgage.)

    And the power of the regional broadband monopolies in the United States – who just happen to be the cable companies – is perhaps inconceivable to a rational observer.

    Our most recent Federal lawmaking regarding Internet service is notable not for its widely-touted “net neutrality” effects,but rather for it explicitly granting local municipalities the right to provide broadband service that competes with the entrenched corporations.

    (The business of the United States is Business, and anyone getting in the way of the machine is counter-revolutionary and subject to police action.)

    • Walt French

      Yes the FCC has green-lighted municipal competition to ISPs but only the most egregious exploitation will be challenged. ISPs are not so foolish as to overreach and part of their expertise is how far they can go.

      So the natural monopoly of the last mile cable is extended by granting that one company control over both connections—dumb pipes—AND the content, continues unabated. Overpriced “value added” service is tied to a sweetheart deal for basic services in a way that guarantees no competition for eg broadband Internet, said to have a 90%+ profit margin.

    • http://www.asymco.com Horace Dediu

      If only business (or Business) were easy to define, categorize or predict.

      • BoydWaters

        Indeed. In this context, the trend of “declaring war” on poorly-defined concepts has led to egregious expansion of many forms of government largess. “War on Drugs”.

        Sorry that’s ranging rather far afield of this article’s topic. But the current environment in the USA, of entitlements to large business, is perhaps germane. Yes, the cable companies ostensibly pay for their franchise, and then they demand perpetual protection from disruption.

        Not what they paid for.

  • http://twitter.com/matthewwanderer Matthew

    Two words on video content disruption:

    Live. Sports.

    • handleym

      I do wonder if the sports fan are in the same position as video game fans.

      The video game fans a few years ago (and plenty of them today) were sure that the world revolved around them, that new GPUs and new games were designed to meet their needs, and that this would continue forever. They have not been happy to learn that this is all massively delusional, that most people, to the extent they even care about games, are interested in a very different sort of game, that GPU vendors are more interested in low power than in performance (at the low-end) and in meeting the needs of enterprise and HPC (at the high end), and that video gamers are left picking up whatever crumbs may fall from this other, higher priority work.

      I would not be surprised to discover that sports fan form the same sort of group: very vocal, very visible, but ultimately just not that large, and eminently ignorable by anyone whose business model does not rely on pleasing absolutely everyone all the time. And that these fans (and their suppliers, from the franchises to TV and cable companies) have been very deluded as to how much they actually matter in the entertainment world.

      I could be wrong of course. I know no-one who would miss sports if they weren’t available. Which may mean that I live in a bubble. Or it may mean precisely my point — that there’s a huge population that would happily support your service if it didn’t require paying the ESPN tax…

      • uniquename72

        “I could be wrong of course.”

        You are. Video games of today are leaps and bounds beyond where they were even 5 years ago, graphically. Gaming is still the primary driver of GPU tech, with low-power being an additional (not a replacement) department within the major chip design firms.

        But more on-topic: I cut the cord 4 years ago — when my basic cable bill jumped from $45 to $60 within 6 months — and never looked back. I get OTA signals good enough for my 100″ projector (although I rarely watch live television anyway). When I want sports that aren’t OTA, I can visit a sports bar less than 3 blocks away that has a complete satellite package. Bonus: They serve great breakfasts.

        (note: I’m a PC gamer. I don’t know anything about consoles.)

      • trip1ex

        The cost of going out to watch sports isn’t cheap compared to the cost of cable.

      • http://www.swift2.blogspot.com Swift2

        Quite right. Always a place to see the latest sports ball game amidst convivial acquaintances drinking beer. And cheaper.

      • lechri

        The problem with the hardcore video game business is that the hardware has become too good, and in order to take advantage of it and create blockbuster games (which the hardware has made possible) developers need movie-like budgets. That is what hardcore gamers want, but that is not a sustainable business model for developers, so they go to mobile where casual gamers demand a lot less and there are hundreds of millions of people playing.

      • Vlad Preoteasa

        Wow, spoken by a non-sports fan I presume? The amount of money that the sports industry (if you can call it that) generates is orders of magnitude higher than the video games. Prove me wrong. I wouldn’t be surprised if one star athlete on an NFL franchise made more money in a year than most gaming houses or perhaps even console makers.

        Money talks.

      • GlennC777

        The point is a good one, though, that the minority of viewers may be responsible for much more than their share of costs. If those viewers were forced to pay their share it could be prohibitive. Or at least much more expensive than it already is.

        Whereas the majority, “casual” sports fans and non-fans, are actually paying more than their share currently.

        You are right, though, that there is an obscene amount of money in sports. A nonsensical amount, it seems. Perhaps that is an accident of the status quo.

        – Occasional/casual sports fan

      • Vlad Preoteasa

        Are they really a minority? Maybe in numbers, but what about value (think Super Bowl commercial cost)? Part of me thinks that sports industry is propping up traditional media.

        I think we can agree that the value of sports transcends the medium. Generational bonds, insane behavior, entire nations shutting down during the world cup, the list goes on. There’s also a ‘sports industrial complex’ in place that introduces children.

        It’s big business. It’s a lever for disruption through technology driven industry shifts, but I would argue that it’s too innate/personal to be disrupted itself by technology.

        And for those curious: Estimated Size of the Global Sports Industry 1.5 Tril. US$ (2014)

        http://www.plunkettresearch.com/statistics/sports-industry/

      • GlennC777

        The industry of sports has clearly become much better at what I call “value extraction” – that is, it has become very good at getting people to pay huge amounts to access sports programming.

        Perhaps this is like the music industry in the eighties: able to entice people into paying a full album price for a single favorite song through the sale of an LP record – and then, a few years later, to pay the same, yet again (!) for the same song on CD. The industry was able to extract enormous value from something representing a small cost to produce.

        The music industry was famously disrupted by the ubiquity of electronic media and, later, by iTunes, which represented a reasonable compromise between production costs and profits.

        The sports industry extracts profits many multiples higher than production costs. A similar disruption seems possible.

        In general, pricing near production costs is better for consumers; pricing far above production costs is better for producers; and we rely on the market for arbitration. If the markets always worked well, there would be few opportunities for disruption.

      • Vlad Preoteasa

        Yes!!!! That’s the kind of thinking that get’s me excited. Even though I still fundamentally disagree, thanks for that analog.

        As a retort, I would suppose that the sports industry business model parallels Apple’s in how the value of the product experience is much higher than the production cost. I would ask you to reconsider why people are choosing to pay a premium. The influence of such a market leader should also not be overlooked (i.e. Apple on supply chain).

        In my view, the fate of the sports industry is not going to be a race to the bottom.

      • http://www.swift2.blogspot.com Swift2

        I know a lot of people who yell, “it’s my money,” and “socialism,” when it’s applied to medical care, but they depend on all us suckers getting the sports package to pay for their (name of favorite team) here. Let ’em pay for what they want.

      • zornwil

        I think it’s hard to say when we talk about total industry “generated” revenue. We have billion dollar games now and gaming at the micro scale is so popular entire advertising models are built upon it, let alone movies, action figures, etc.. Of course the sports industry is huge; I do tend to think it’s significantly bigger (I work in the sportswear industry, so am quite exposed to sports marketing, sports assets and their values, etc.), probably an order of magnitude, but it’s hard really to say when we talk about total “generation” of revenue (as opposed to comparing gaming companies to sports clubs; here we would see one or a few gaming companies as higher in revenues than many clubs/franchises, not sure re profits).
        Gaming is pretty darn huge, both on the high end and on the low end, regardless that it may be (but may not be) an order of magnitude smaller in total business generated than sports.

      • Roo_44

        To support your thesis:
        “For example, the Texas Rangers will make about $115 million this year from Fox Sports Southwest, which has 2.7 million subscribers but only 58,000 average viewers per Rangers game. That’s 2.2 percent of the subscriber base. The chances that the Rangers could earn $115 million in paying subscriptions are next to none without asking viewers to pay an exorbitant monthly fee. So in Texas, if even five times the number of average viewers decided to pay for the channel, they’d have to pay almost $400 a year.”

        http://m.espn.go.com/mlb/story?storyId=12508142&src=desktop

      • Walt French

        Great factual info* that ought to be re-read more widely by bundling apologists. Tho it *might look* to challenge the notion that it’s the ESPN tax, if all the money goes to the Rangers?

        There’s another interpretation, however.

        Perhaps what it shows is how desperately willing ESPN is, to hold its monopoly of games, enough to way overpay.

        To my eyes, this is a very similar to the very high prices carriers pay the FCC for spectrum. Over-buying (and not building out) spectrum would have the convenient side-effect of making it very hard for a small (startup?) carrier to get a slender slice of the available spectrum. They have to buy it before they can sell it, and that tremendously discourages…new entrants/competitors. Of course, the spectrum fees are a relatively small fraction of Americans’ total bills… another good sign of trouble that the supposed bottleneck is in fact not much of the value.

        This is not utterly MY speculation: former Chairman Genachowski has noted some troubling side-effects of the way we now conduct auctions. Middlemen locking up exclusive rights on producers is a handy way of extending the sports franchises’ monopolies, for their own great profit.

        * The Rangers are such an anomalous (“weird”) team in so many ways. It’d be great to see wider franchise-by-franchise data.

    • Tim

      And sports fans I know ages 22-35 watch sports via websites and pirate live events. They don’t pay for cable anymore.

      • http://www.asymco.com Horace Dediu

        Wait until meerkat picks up. 2000 live streams from any given game?

      • GlennC777

        Or an app specifically designed for the purpose, with built-in anonymity.

      • anon

        doing so would be illegal. are we ready to concede that many of the “innovations” in the tech space are really just creating the ability to break existing laws at large scale?

      • http://www.asymco.com Horace Dediu

        Indeed. When everybody breaks the law, the law changes (totalitarian regimes excepted). Corollary: when everybody is a law breaker, the law is broken.

  • marcoselmalo

    The TV channel model is ripe for disruption. Current model is the channel as the delivery mechanism as content. That is, your favorite programs are delivered by a channel. You must tune into the channel to enjoy your program. Bigger picture: a cable service is a bundle of channels. You tune into the channel to watch your program. A lot of effort is put into keeping you tuned into that channel!

    Those who control the channels have gatekeeper power, as they control a finite resource. In the age of broadcast, this resource was truly finite: there is only so much spectrum. In the age of cable, the finiteness is artificially and arbitrarily imposed by the bundlers.

    The disruption is this: the Internet (or an Internet governed by net neutrality) removes the gatekeeper function and its correspinding power. Programs can reach their audience directly, without the permission of the cable companies and their subsidiary channels.

    Which is not to say that there aren’t quasi-channels (Netflix, Youtube, etc.) that perform a program bundling function and a “soft” gatekeeping function (curation and financial support to program creators). Perhaps we will see Apple insert a slightly different model with its new subscription program: what if users can pick which channels they want in their bundle?

    The final disruption for TV viewing will come with the device makers offering “app stores” open to 3rd party developers. Now the program creators will have a simple and direct means of reaching their audiences. IAP (In App Payments) and downloadable content will offer new models for monetization and financial sponsorship.

    At least, I can see this happening and I think it’s a better business model for both users and content creators. I really hope Google and Apple are moving in this direction for their ChromeCast and Apple TV products.

  • davepak

    Cable companies defend this by saying “you are getting more value”!.
    Meaning they have put more garbage channels out there.
    They keep coming up with excuses on pay per channel pricing – because they know no one will buy all their excess bloat.

    I watch maybe 10 channels, tops. The rest is hulu or netflix.

    • http://www.asymco.com Horace Dediu

      Is something valuable if it cannot be refused?

      • sigaba

        But are two separate cable channels or cable programs separable products? The price is quoted for all the channels altogether, if you choose to have content A but reject content B you might not end up with either, because B subsidized A, and A alone might not actually be economical to produce for the prices subscribers would be willing to pay.

        $15 a month for HBO makes sense to enough people that HBO can countenance unbundling. But ESPN knows that they probably couldn’t operate profitably, they hit about 100 million screens and clear about $200 per screen per year in revenue (25% from ads, the rest from subs). however only about a quarter million people watch ESPN any given day, and FAR less than than 100 million people would pay $15 a month. If you unbundle ESPN from Nickelodeon and A&E, there’s no more ESPN. There’ll still be sports coverage obviously, but the EPSN product, it’s added value and level of service, would no longer be available.

      • jfutral

        Sure they are separable. With the multiple distribution possibilities available today A is no longer dependent on a cable company to have a shot, even if it never was watched on cable. That’s the opportunity OTT offers. A does not _have_ to be tied to B anymore. And B does not have the weight of A, either, allowing the possibility of increasing revenue for those who did not want to pay for either because of A. If B is _truly_ subsidizing A, unleashing B so it can generate the greatest revenue will actually help A.

        But this is the illusion the “bundles”. It isn’t really about subsidizing. It creates a false demand for something that at best has a small, esoteric audience. If the recording industry took TV’s model as their’s, then every pop album would have a jazz album bundled with it. Albums already experienced their own unbundling for the same reason. No one wants to pay for what they don’t want. Bundling is about power, nothing more.

        Joe

      • sigaba

        That’s how the recording industry DID work, labels wholesaled to record stores in exactly this way; a minor retail example was Columbia House and the various “clubs.” Now they don’t, and not only is jazz dead, so is the album. All we’re left is 3 minute ads for Justin Bieber et al., who are successful not for their quality, but because they are effective at branding content and media experiences. Funny that.

        I mean, when you say “unleash” B, what you actually mean is “make B as watered-down and puerile as it needs to be to turn a profit.” What we’re talking about here is ESPN as a guaranteed loser, it can’t make a profit the way it’s structured if it were pay-for-play, it’s the A&E reality shows that are the profit centers, the Comedy Central reruns, that’s the stuff that makes all the money, you unbundle ESPN and the reality shows will be all you have left.

        This is totally consilient with “disruption,” though. Technology companies have an overt goal of making all content as bland and undistinguished as possible, so it is easier to market and target, and easier to funnel in to the many new and amazing gizmos and media platforms they make their actual money on.

        I mean, Netflix makes House of Cards, but they won’t let you unbundle House of Cards from the service. Why? House of Cards is a huge loss leader, it’s meant to drive subscriptions. Just as ESPN is a loss leader, and just as jazz used to be.

      • jfutral

        The death of the record store itself not-withstanding, the customer for David Bowie wasn’t forced to buy that jazz album by Ornette Coleman.

        Other than that, I suggest learning what the term “loss leader” actually means.

        Joe

      • zornwil

        Loss leader, ”
        a product sold at a loss to attract customers.” This seems to fit what @sigaba is saying, so if you have some point in this regard please don’t rely on your attempt at implying and our likely-incorrect inferring. I think I have a guess, but it’s only a guess, as to your point in this regard. I am interested to understand what the point actually is.

      • zornwil

        But music services now are bundles, and bundles of content one only may (theoretically and per contract terms) lease, not own. I’m not saying that’s bad or good, but it’s certainly bundling, and the ability to say to Spotify or Pandora or Grooveshark “I only want to pay for these artists/labels/songs” is entirely non-existent (which is fine given the price points, but is bundling).
        Album “bundling” usually has nothing or little to do with “power,” especially or at least following the rise of the album *as such.* Many if not most artists construct an album as such, as a singular work consisting of elements. Certainly it’s a fair argument to say the creation of the album of songs came from a position of maximizing gain and we can call that power potentially (I think that’s a misuse of the term but I can understand the argument), but that changed over time as the album unit became its own creative element and not a mere commercial construct.

      • anon

        bullshit argument. I have no interest in many of the features that Apple throws into the iphone, but I’m “forced” to buy it for the features I want.

    • zornwil

      There’s no reason to assume someone is on a payroll because they happen to share an opinion or belief. Nor is there any reason one is “being duped.” Neither is relevant to simply examining the facts and making a decision; we do not need to engage in the worst suspicions of each other, rather simply focus on the information.

  • sjcobrien

    I think this is still mostly a wishful argument. While the penetration rate of cable subscribers is falling, I believe the actual number of subscribers is holding pretty steady. In addition to sports, there is still little leverage over content in the U.S. There is not the same legal obligation to make video content available at the same costs as say, DVDs back in the 1990s. And what does the alternative look like? People like to say, well, I only watch 5 or 10 channels. But what would those costs separately? We can see HBO thinks it’s worth $14 or so per month on its own. For people who really do limit their viewership to 10 or viewer channels, there might be a bit of cost savings. But that’s probably not the case for most people. There’s still a long way to go before the cable industry is forced to substantially change.

    • http://www.asymco.com Horace Dediu

      How long?

    • Tatil_S

      Why would you define media consumption in terms of “channels”? Do people really watch channels or shows? I doubt people can follow more than 10 or 15 weekly shows. I suspect most people follow fewer than that, let’s say ~5, with more acting as background noise, but a rerun of any old show would do for that purpose. (Netflix is full of those and more at less than $10 per month.)

      • zornwil

        I occasionally have TV on as something like background sound (I think it’s not exactly that; it’s something I can engage and disengage from easily while I do something else, a distraction to momentarily relieve/rest/refresh my mind in intellectual or creative labors). In that event “any old show” will NOT do, and that’s what I’ve seen with my spouse as well and my parents before her (both my parents and my spouse are folks who have the TV on most of the time). To your point, of course, it’s very casual viewing, but typically one wants a show one really enjoys but has such high familiarity with one is not concerned with missing moments, rather instead relishing the moments in which one happens to engage.
        Just to provide some insight into a casual viewing style. I cannot say how statistically common and I do not mean to imply my anecdotes should be taken as more than that.

    • Tatil_S

      HBO is already a stand alone subscription at roughly ~$15 per month on top of an already hefty cable TV bill. HBO doesn’t “think”, it already knows it is worth that much to a certain number of customers. If other channels believed they were worth that much to that many people, they would have already separated themselves out as additional subscription.

      Kids are watching cartoons on YouTube or Netflix rather than TV. Slightly older generation is getting their news from the web or social networks. A big chunk of their entertainment is spent on mobiles, which leaves less time for TV. As more and more of that generation start forming their own households there would be fewer and fewer cable subscribers. A few shows at set schedules via outdated “channel based” user interfaces and live sports will not be enough for them to start spending $100 a month.

      • BMc

        And the content that kids watch is different as well. My kids spend more time on Youtube than on regular TV, watching videos about crafts, “gamer channels”, Internet only content like ERB of History, etc. Some of course will pickup other content as they grow into adults, but I think a huge disruption is brewing under the service with the younger generations.

    • minimalist1969

      We watch about 8-10 shows a year in my household … 3 or 4 of which are actually on HBO. Broadband is a given. You pay for it whether or not you have cable TV. So 15 bucks for HBONow and buying 10 seasons on iTunes/Amazon at an average of 30 dollars a season = $480/year. The cable package that would allow us to watch all those shows (HBO, A&E, AMC, FX, PBS, BBC, and IFC) would cost a minimum of 70 dollars extra a month on top of the cost of broadband. That would be $840/year.

      So it’s hardly wishful thinking. Cord cutting can be done now and for a significant savings. The other benefit is you will never waste time channel surfing again. Only watch the shows you care about.

      • BMc

        Fully with you there. There is some question about how content discovery will happen when more & more don’t have those channel bundles. I suspect that content discovery will become very fragmented (different social media, content blogs, etc).

      • minimalist1969

        Content discovery happens through friends and colleagues or rottentomatoes or avclub or any other site that that recommends great shows. Even when I had regular TV I rarely watched a new show just because I stumbled on it. I have always been picky about what I watch and found channel surfing to be a waste of time.

    • GlennC777

      One problem is that under the current system a large part of the consumer cost goes to a dumb-pipe middle man which has managed to monopolize the distribution of the content while actively stifling innovation. With other mechanisms for distribution, the real appeal is that this inefficiency can be reduced. The costs will work themselves out, but will go entirely to content production rather than having to make their way through a straining mechanism first.

    • anon_coward

      not really. it’s known that a lot of people in their 20’s aren’t getting pay tv in the first place which doesn’t come up in the cord cutter numbers. i work in the same building as a lot of people like that and in the elevator all they talk about is netflix.

      except for sports, netflix is already good enough. you can already pay to steal hockey and basketball. NFL is on broadcast and you only need cable for MLB. but MLB is dumb and some teams aren’t available in many parts of their home markets which is why football is more popular.

      i’ve watched cable since the 80’s and there is literally nothing on except sports. used to be you can turn on a documentary on discovery or history channel and veg out, now it’s all reality crap. MTV hasn’t had music for decades now. movies are unwatchable with the editing and commercial breaks.

  • bjarne

    It is an interesting discussion going on here. I find it amazing that the american population is still so hooked up on cable technology! I have houses in US, Norway and Switzerland. I bought a small TV box a year ago, – small enough to put in my pocket. Furthermore I can subscribe to as many channels (country wise) I like, presently approx 700 ch. My provider is not the big and fat cable company, – I have tested out three providers (mom and dad businesses) in Cyprus, Malta and Spain. I give them the MAC address printed on the box, and within 5 min. I have access to all the channels. I pay less than USD 20 per month, and can freeze my subscription at any time. One of my TV-boxes (presently two boxes) follows me when I travel, and when I arrive in US I hook up the TV-box to the WiFi router. It works very well for my family, and when my friends realize what I have done; – bang! where do we get this box?

  • http://twitter.com/jimhirshfield JimHirshfield

    Exceptional overview and analysis. Thank you!

  • fran

    thank you for data of USA market! very hepful for my own work

  • RDGEEK

    Cut the cord back in 1993 or so. Anyway, I wonder what regulatory schemes will be invented in the coming years by the cable lobby to prop up the industry and keep its zombie phase around as long as possible?

  • http://www.raytheon.com/ Dr. Strangelover

    Live sports are what’s preventing this slow-moving lava flow from turning into an avalanche.

    I need my live sports, plain and simple. I would’ve cut the cord long ago were it not for the need for me to be able to watch the Golden State Warriors live at 7:30 p.m. tonight. I can’t timeshift the game; I can’t rely on some shady Eastern European website that live streams sports from all over the world; I can’t download it 48 hours after it airs from the iTunes Store; I can’t get it on BitTorrent.

    Add to that the fact that the Warriors play live on Comcast SportsNet, and it makes my wish even more difficult to fulfill.

    Crack that nut and I’m there.

    • Tatil_S

      Advertisers want to follow the “young” and they are not signing up to pay $60 a month just for sports. I am pretty sure in the next five years, it will be possible to get ESPN or Netflix at far less than $60 a month as a streaming service. Baseball has been more progressive on this front, but I doubt NFL or NBA will stay behind times for very long.

      Of course, they may also decide holding games during school nights is an impediment in a world where academic achievement is more of a “must” and shift to fewer games, but more of them on weekends.

      • http://www.mixotic.com Mixotic

        You can get ESPN, plus a variety of other sports channels, on Dish’s Sling TV service right now. I was just looking at it to see what the sports options are (in search of a way to stream BeIN Sports for soccer), and they have quite a few things that are $5 add ons to the basic $20 service. I imagine they are going to be pursuing this aggressively, and it seems like the only option that’s even close to the true a la carte option we’re all looking for.

        It will be interesting to see if the rumors are true, and Apple reveals a new TV service similar to what Dish has. I would love to see them offer individual channels for $1.99 – $2.99/month, with services that have multiple channels or premium content, like ESPN and HBO, able to offer packages for higher prices. That would be a real game changer.

    • http://www.asymco.com Horace Dediu

      It’s impressive that individuals can become broadcasters (Meerkat) but billion-dollar sports franchises can’t.

      • Walt French

        Maybe not so strange. @Roo_44 makes an excellent case below that sports franchises are in on the fix, while Meerkat has no current revenue stream to lose… only a case to prove to its backers.

        I think the mechanism @Roo_44 discusses — in my words, that ESPN over-pays a sports franchise to ensure they can’t go around ESPN, so ESPN maintains an absolute chokehold on pro sports — is at least very plausible. But my micro-econ training was long enough in the past that I can’t recall it countenanced in discussing firms.

        The other point in Meerkat’s favor is the dollar cost of viewing a game. It’s WELL above what you could monetize with ads, besides which, sports franchises are probably very happy to outsource all the subscription, customer service and tech support concerns to ESPN and the cable companies. (Purportedly, that’s what drove HBO to hook up with Apple—they couldn’t manage those functions on their own.)

        Somebody who’s more familiar with competitive theory would be very welcome to weigh in here.

      • sigaba

        There’s a little bit of a difference between a platform for posting animated instagrams, and a nationwide production infrastructure. A single sporting event covered as a live ESPN broadcast will have dozens of cameras, and a field crew of about a hundred people. And ESPN maintains dozens of such crews full-time.

        So let’s take the NFL, they have 32 teams and each has maybe 18 games in the normal season, one a week, all on the same day. If they did it in-house they’d have to have a separate production unit for every other team (one unit per two-team matchup). That’s about 1200-1500 people on payroll, in a seasonal gig that only goes 4-5 months — coordinating the local hires alone would be a gargantuan task. The NFL would have more people on staff shooting the games than it does actually playing games.

        I guess if the NFL just up and bought ABC, they’d have the skillset and talent pool to pull it off. But anything less than that and they’d probably make a hash of it. It’d be like Apple becoming a movie studio.

        The NFL is a bit special in that they’ve actually had an in-house production unit for a very long time, and they produce high-quality, award-wining documentaries and sports films. But NFL Films is a tiny organization, with a permanent staff you can count on two hands.

        (I am struck that, even after all these years Horace, your coverage of entertainment and media is still mired in this glib dilettantism. “Why doesn’t the NFL just cover it’s own games on Meerkat?” Gee, I dunno Horace, why not?)

  • grovberg

    Okay I must be missing something.

    All of the discussions of the $130/month high cost of cable, including this one by the very data-driven Mr. Dediu, completely disregard the fact that the majority of that cost is not your cable TV, but your high-speed internet access (which is usually from the same company). This seems like such a massive oversight, that I must be missing something because I can’t understand why everyone gets excited at the prospect of cord-cutting when that will only actually reduce the costs by a meager fraction. We watch very little TV and would happily drop it, but I currently pay only about $25/month for my cable TV (as calculated by subtracting my total monthly cost from the cost of just internet service) which is significantly less than I used to pay for cable alone.

    So seriously, what am I missing?

    • darrinmc

      I was thinking the same thing. If I dropped TV my cable bill would only go down by about $25. To get live sports and avoid the hassle of using an Apple TV it’s worth it to me.

      • Tatil_S

        Is your total bill $130? If not, then yours is not a “typical” household, which means TV part of the bill of a typical household is larger. In addition, most of Comcast’s profits may be coming from a minority of households spending more than the typical bill, so the potential for savings may be much larger for them and downside to Comcast might be bigger than mere averages suggest.

      • darrinmc

        It is right around $130. I’ve looked into it and as you probably know, once you cancel one service, the price for the others goes up. The differential was not the same as subtracting the cost of the DVR plus TV service that shows up on the bill.

      • Tatil_S

        I don’t mean to doubt your calculations, but if you end up paying $105 just for internet access when you drop TV, you’d be paying a lot more than anybody else I know. It may be due to higher speeds or fixed IP address or some geographic limitation or some other service that you need, but I am not sure if this is “typical”.

      • darrinmc

        It included phone also

      • http://www.mixotic.com Mixotic

        The “hassle” of using an Apple TV.

      • darrinmc

        I can’t stand the Apple TV interface.

      • Tatil_S

        What is wrong with an interface that requires you to scroll through 40 colorful squares? :)

      • http://www.laugh-eat.com/ kyron

        Nothing requires you to scroll 40 icons — turn off the ones you don’t want. I have about a dozen and that’s it.

      • ChuckO

        Watching on Apple TV as it stands is substandard experience compared to cable. I watched a lot of world cup soccer on the Apple TV ESPN Watch channel and jumping between games and dealing with buffering wasn’t much fun. Compared to cable you have to commit to what you’re watching to a much greater degree.

        The “app” experience on Apple TV would be a non-starter for a lot of normals with the buffering and inability to move quickly and easily between shows, drilling through menu’s.

        I assume part of the relaunch of AppleTV would include changing the UX quite a bit.

      • Tatil_S

        “There is a new episode of the show you’ve been following” vs.
        “Recall the name & icon of the channel that shows your show, scroll to the channel, scroll to the icon of the show, check if there is a new episode this week”.

      • http://www.laugh-eat.com/ kyron

        Big icons and a few menus….what’s to stand?

    • http://www.swift2.blogspot.com Swift2

      I stopped when I realized I couldn’t have HBO plus the News “package” and Comedy Central, and yes, a little ESPN, plus a dumb phone and the Internet for less than $200. I said, well, drop the telephone. Okay, that means you pay $195. Why? The phone is $25! Yes, but the TV and Internet are “special prices” for those taking all three. That deal is over if you drop the phone. Okay, drop everything but the fast internet. Oh, that price goes up to $75. I had to try three times to quit them and get a year of 30 Mbps Internet for $29.95. And the “reduced price” deal from the Satellite TV. Total: $100. Then I stopped that. Netflix and broadcast on my Internet — now 65 Mbps for $45, and a Netflix sub. And there are 400 channels, but they’re laden with Kardashians and thousands of shows I will never watch more than 5 seconds. I’ve been quite happy with Netflix and broadcast, and I’ll add HBO next month via Apple TV. I can’t stand being programmed any more, and “special priced” and “tiered” into paying a fortune every month.

      • trip1ex

        I always love the cord cutter argument that cable is littered with shows they don’t watch. Meanwhile they think nothing of the tons of shows they don’t watch on Netflix and even the many movies and original programming they don’t watch on HBO.

        With your logic you should be paying $2/mo for HBO and $1/mo for Netflix.

        And of course $200/mo or $195/mo was the only choice in a cable package. Typical cord cutter example.

    • trip1ex

      You aren’t missing anything. Cord cutters have to quote triple digits for cable tv to make their point. They then have to compare that package to Netflix and OTA. All as if Netflix is this magical service providing the same content as a standard cable package. They also like to quote 100+ OTA channels even though, for most of us, there are only the 4 networks and PBS that we would ever bother with.

      In other words, cord cutters are the same human beings responsible for satellite and cable tv marketing materials.

      • minimalist1969

        My household has 60 dollar limited basic cable cable plus broadband and HBO. We watch about 10 shows a year 2 of which are on HBO. To get those shows, which are spread across a variety of channels we used to pay $135/month. Now we simply buy the same shows from iTunes/Apple TV. Our yearly costs went from about $1650 to about $950.

        That’s real savings, not creative accounting. Cord cutting (or cord minimizing in our case) does in fact work. And as soon as HBO Now is available we can get rid of the limited basic cable part and we will truly be cable TV free.

      • trip1ex

        You aren’t a “cord cutter.” You just downsized your cable package.

        I’m all for not getting a larger cable package if you don’t need it. And then using iTunes to supplement.

        But personally I’ve never paid an extra $75/mo just so I could watch a few extra shows so I’ve never had your problem. I always said no.

        And your example does have its share of creative accounting. You say you watch about 10 shows. You don’t list them. I’m for using iTunes etc if it makes sense, but I also know that predicting how much money you are going to spend on iTunes isn’t even close to as predictable as the cost of your cable package. You don’t know what you’re going to spend on iTunes during the next year.

        Also you compare the prices of 2 cable packages that each include internet. You aren’t comparing a tv package to a tv package.

      • Guest

        Not creative at all. The shows average about 30/season all of them being between 24.99 and about 34.99. I did not list the shows out of brevity but I can assure you that the Comcast package to watch them all cost us 135/month before taxes. That’s 75 more than the 60 dollars a month we pay now. 75 bucks a month will buy a whole lot of seasons of shows a la carte. 24 or 25 by my count.

      • minimalist1969

        Not creative at all. The shows average about 30/season all of them being between 24.99 and about 34.99. I did not list the shows out of brevity but I can assure you that the Comcast package to watch them all cost us 135/month before taxes. That’s 75 more than the 60/month before taxes we pay now. 75 bucks a month will buy a whole lot of seasons of shows a la carte. 24 or 25 by my count in all. And since we don;t watch that many we are indeed saving a significant amount of money.

      • jfutral

        I went a similar route except I did cut the cord. When my wife and I figured most of the shows we watched were OTA, with an exception or two, I bought an HDHomerun, and antenna and a used Mac Mini. Since then I purchased a second HDHomerun and we can record up to four programs at once for later viewing. The one or two shows I want to watch that aren’t OTA I buy from iTunes. My wife waits for hers to come out on Hulu. Ten years later, the decision has more than paid for itself.

        Joe

      • trip1ex

        Joe,

        That’s great. But you aren’t a cord cutter either. You’re a cord never.

        And I too have saved a ton of money over the past 10 years from not buying stuff I didn’t need or want.

      • jfutral

        Ten years ago I cut the cord. You have a huge chip on your shoulder. It may be time for a break.

        Joe

      • trip1ex

        10 years ago. Long enough to be a cord never. Tv shows on iTunes and Hulu and HD Homerun weren’t even around. Used Mac Minis didn’t exist either 10 years ago.

      • jfutral

        If you say so. You must be too young to know.

        Joe

      • trip1ex

        You’re not fully disclosing the differences in the packages you are comparing. And the packages you are comparing aren’t tv-only packages.

        And again, you can’t say what you’re spending on iTunes for the next year when you can’t what you’re buying during the next year.

        $25/mo on iTunes is about 6 hrs/mo of tv.

      • minimalist1969

        Sigh. What do you think I am? Some shill for the cord cutting industry? (whatever the hell that may be).

        All I can say is that the amount of shows we watch in our household has remained steady for several years but the price we pay to watch them has dropped drastically since we started buying our TV shows instead of getting the tier that allows us to watch them the traditional way. Quicken doesn’t lie. There have been real savings. It may not work for everyone given what they watch and how much but saying cord cutting or cord reducing is strictly some fantasy of people who play deceptive numbers games is false.

      • trip1ex

        The fact you won’t address the comparison of packages that aren’t tv-only nor address differences in those packages speaks volumes.

        And I never referred to those who downsize their cable package in my original post.

        I am well aware that one can get a smaller cable tv package and then use some of their monthly savings to buy episodes of shows on iTunes. If the math works great.

        Personally if the difference between a $60 bill and a $135 bill was 6 hours of tv per month then I never would have been paying $135/mo. I would have said no.

      • minimalist1969

        “The fact you won’t address the comparison of packages that aren’t tv-only nor address differences in those packages speaks volumes.”

        It only speaks volumes to someone looking to reaffirm their believe that cord cutting NEVER saves money.

        I honestly don’t care what you think. We save money with this super cheap Comcast bundle each month and we have saved money in the past on internet only plans from U-verse and soon will be doing so on an internet only plan from a new fiber company installing in our neighborhood. But I guess the numbers I will see on my bill each month will all be a fantasy though because trip1ex has decreed that there is no way cord cutting EVER has or ever will work and that anybody who sees a savings is really just delusional.

        Whether you believe me or not does not change the fact that its cheaper and a better experience for us to get our TV this way.

      • trip1ex

        It speaks volumes for someone that wants transparency in a comparison. You aren’t providing it despite being prodded 4x to do so. That usually means you’re hiding something. Where there’s smoke there’s fire.

      • minimalist1969

        Guess what? I never said cord cutting or cord reducing saves everyone money. I said it saves OUR household money. I have nothing to prove to you or anyone else. it’s you who is hellbent on upholding your absolute belief that cord cutters are deluding themselves.

        If you are so intent on proving that cord cutting is delusional fantasy then its your responsibility to do the legwork to prove it is. All the shows we watch and the channels they are on are listed 8 posts above. All the prices are clearly listed in iTunes and on Comcast. We have Comcast Internet Plus. Knock yourself out.

      • trip1ex

        Comcast Internet Plus has slower internet. The $75/mo less you pay each month isn’t just from downsizing the tv package.

        That’s your creative accounting. Case closed.

      • Tatil_S

        Watching a show without advertising is a lot more fun. You might want to include that in your calculations. HBO doesn’t charge $15 a month just for the few different shows it produces. It gives you advertising free entertainment as well. You’d be remiss to omit that for shows watched on iTunes, Netflix or BluRay.

      • minimalist1969

        I don’t get any ads on Netflix but HBO does arguably have better shows overall and Hulu’s ads, lack of consistency in TV show back catalogs, and lack of differentiation from Hulu free (why does free sometimes have more than the paid service?) makes it a maddening experience. HBO Go seems like over the top TV done right and Hulu Plus is a perfect example of over the top TV done wrong.

      • zornwil

        I’m glad you said that re Hulu. I see so many people saying how great it is, we have a subscription for some reason (I don’t recall why, my spouse did so), and it seems really just messed up for the reasons you stated. I thought I was missing something!

      • minimalist1969

        “Comcast Internet Plus has slower internet.”

        Who gives a damn? 25 mbps is more than fast enough to stream UHD Netflix and YouTube content so its a distinction without a difference. The goal is to get the shows we want, over the top, for less than it would cost using a more tradfitional bundle. The fact remains that it works and it costs less. Those are the only metrics we need.

        “Case closed.”

        Well I guess that settles it then! Trip1ex is king of the internet now.

      • jameskatt

        The ones that can cut the cord are those who hardly watch TV in the first place.
        In this case, it is a family who watches only HBO. How weird is that to watch only HBO?

      • minimalist1969

        “We watch about 10 shows a year 2 of which are on HBO”.

        The other 8 or so are spread out across FX, PBS, AMC. A&E, BBC, and IFC. I’d say there is nothing “weird” about watching some of the most critically acclaimed shows on TV…. Game of Thrones, True Detective, Better Call Saul, Bates Motel, Downton Abbey, Sherlock, The Strain, American Horror Story, Mad Men.

      • zornwil

        I think that’s the heart of the point. If one watches as “little” television as you, there’s a lot of sense to that change. If one watches a lot more, I can’t see any sense to that change (for now, I mean).

      • http://www.laugh-eat.com/ kyron

        Nonsense. My internet is 60 bucks (higher than it was because I went up a tier). I only watch a few shows which I buy on iTunes. Netflix fills in with a back catalog of TV. I don’t watch sports except my local team OTA. So for under 70 I get fast gaming Internet, and the TV I care for. I haven’t had cable since the early ’00s. So you do the math…I added it up once and Ive saved thousands of dollars over the years.

      • trip1ex

        Next you’re going to tell us you take the bus and are saving thousands every year by not buying a Mercedes. And have done so the past 10 years.

      • zornwil

        Which is true for me, but I well recognize I’m an outlier in that regard.

      • jameskatt

        As you said: you don’t watch much TV. You don’t watch sports.

        Those statements mean you are already an outlier. You are not the norm.

    • http://www.asymco.com Horace Dediu

      “Cable” is a bundle where the costs and prices are obfuscated because of their co-mingling. Broadband is a commodity and would be normally priced at its cost (see countries other than the US and the patterns of mobile broadband.) At cost, broadband should be in the $10/household range.

      The notion that internet costs “$45” is an illusion.

      I’ll illustrate it with the newspaper:
      A newspaper is a bundle of “news,” “entertainment,” “information”, “ads”, “comics” etc.

      If you said you were only interested in news and wished to receive that module for a lower price, you might be (but won’t be) quoted 80% of the regular subscription. Does this mean that non-news is only 20% of the subscription cost?

      Unbundling caused disruption to music and newspapers. The video distribution business is getting there.

      • zornwil

        We seem to call Netflix, Hulu, etc. “unbundling” approaches but they seem to me to be entirely bundling in concept. I have to pay a fee for a service that has a set range of studio offerings; depending on the service, I might pay per stream, but behind that for the monthly fees with nearly all services I’m paying for a bundle of media, most of which I don’t want and will never watch, AND THEN I ALSO have to WATCH ADS!
        I am seeing zero advantage. I would have to go to multiple streaming parties and sites were I to attempt to replace cable TV (and it seems unlikely I could replace all the TV, anyway, that way), and even if I pay less money now it’s clear that as cable’s demise occurs and as the streaming services take over they will simply raise their rates and show even more ads.
        Don’t get me wrong: I am NOT saying that a Netflix or Amazon or Hulu isn’t a great deal if one likes the shows on one or a couple of those and doesn’t need more. In that case – which fits LOTS of people – it absolutely makes sense. But if one watches some 30-40 shows of some wide degree of variance it’s virtually impossible to get all of those on streaming services for a better value, especially factoring in the lack of easy recording/capture and the lack of a single interface to manage all those services (I’m aware those exist but consumers generally aren’t using them; and from the little I’ve seen, the only relatively good ones still are on TV, such as TiVo’s which orchestrates all of one’s streaming services and cable/pay TV into a single portal – and that sure isn’t that good).

      • grovberg

        I’m not sure I understand this argument. I mean, it’s all well and good in theory, but doesn’t resemble anything likely to exist in reality. Since these two services are provided by the same company, as revenue from cable TV decreases, the most likely outcome is that broadband will simply become more expensive. What force (market or otherwise) would compel them to just give you the unbundled service at it’s bundled price when they have an effective monopoly on the service in most areas?

        A similar situation existed in mobile several times. As data became more valuable than talk time, the providers simply shifted from charging mostly for voice minutes to charging mostly for data. They certainly didn’t just give you the unlimited data at it’s original pre-iPhone price. Similarly, as customers starting resenting being locked into contracts, they did away with them and simply raised prices to compensate.

        I’m not disagreeing that the prices are arbitrary, but since the same company generally provides both services, unbundling the services won’t change anything about that.

  • Chuck Dotson

    I have a question about the $130/month for cable. What does that include? Our cable bill is actually higher than that but it includes HBO, two DVRS, and pretty good internet. My concern is that you might not be making an apples-to-apples comparison (pardon the pun!). When cable initially rolled out there weren’t options for upsell. HBO, wireless cable boxes, digital cable, and DVRs all came later. Horace, how much of your $130 includes these kinds of options?

    • Tatil_S

      Whether you get more for your money than two decades ago is not really an apples-to-apples comparison. After all, providing those services cost much less than they used to two decades ago as well. For example, I don’t pay more for an HDTV than the price of a regular TV set of two decades ago.

    • Tatil_S

      If there is a widespread switch to streaming, there will not be a DVR, wireless set-top box and digital programming to upsell. I think the only common line items would be “internet access” and HBO. Of course, I am not sure if there is anything that can stop Comcast from charging $100 just for internet access in the “streaming” future.

      • Chuck Dotson

        I agree that the most compelling improvement in cable has been broadband internet, no question about it. My question is simply whether Horace’s numbers are really measuring the same thing.

      • Tatil_S

        I agree. Not including internet access overstates the case for potential savings.

  • http://www.swift2.blogspot.com Swift2

    One cable, a million channels: the internet. Some are ads, some you subscribe to. The era of 400 cable channels is ending. Digital broadcast and HBO + Netflix. Sports franchises, end the blackout rules. Then I’ll buy a Dodgers subscription, and I’m done!

  • http://www.swift2.blogspot.com Swift2

    I’ll make a radical suggestion for the sports fan who much watch all games everywhere: watch your addictions. Go form a pick-up softball league, do some yoga, and save up the thrills and excitement for your favorite teams. You’ve probably been following them since you were a kid. They are on the radio, and to me a baseball game on the radio is wonderful. And I’ve watched all of spring training for my team so far on MLB. Ask yourself if you need the seven tiers of college football and basketball and hockey and… I know some are just sports nuts, but most are not and have been hooked on expensive sports packages we don’t really watch, in large part.

    • http://www.laugh-eat.com/ kyron

      Agreed. and on baseball by radio…it reminds me of my father listening to games in the summertime after mowing the lawn. relaxing and pleasant.

  • jameskatt

    The only thing disrupting cable are the high prices which make it unaffordable for many people. Otherwise there is actually nothing on the horizon that is disruptive. After all – for content creators who pays more than cable? No one. Any alternative to cable will just be a variant of cable or a more expensive a la carte model. Streaming TV is just another mutation of cable TV. Comcast already does streaming TV better than Netflix.

    The biggest problem for any alternative to tackle is that video and movie production is ultra expensive to begin with. So how is any creative group going to recoup the cost of production without the subsidy that is cable TV?

    • jfutral

      “So how is any creative group going to recoup the cost of production without the subsidy that is cable TV?”

      Few creative groups/production houses see any money directly from a cable company. The cable company is a monetary middle man. The path from content creator to final TV time slot is quite complex.

      Joe

      • anon

        That is completely incorrect. Why do you think most cable companies actually want a la carte? It’s because they get nothing from the price increases they pass on to customers other than angry customers. The cost they get charged for content is hyperinflationary. Do some research before posting ignorant comments.

      • James

        I think it is arguing semantics here. TV Show X gets funded by Network Y but Network Y is getting funded through cable affiliate fees and advertising income.

      • jfutral

        Except that being charged a fee and paying that fee is not semantically “funding”.

        Joe

      • jfutral

        “Do some research before posting ignorant comments.”

        Exactly,
        Joe

    • mjw149

      No. Comcast has decades old technology, bizarre and antiquated rules and packages and commercials. They literally do everything worse. You can right now go out to Amazon.com pay for every tv show you care about and end up ahead, watching in HD with no commercials. Except for sports, and because some people just like flipping channels or not thinking about what to watch.

      Comcast! Of all companies! They have content deals, but getting them is insanely expensive. It’s almost cheaper to go to the theatre than to pay all the add-on prices just to watch recent movies through a cable box.

      • zornwil

        Re the technology part, I think it depends a lot on where you’re talking about. In some areas Comcast’s technology has been or is being radically updated.
        And they don’t “literally do everything worse,” again at least on a regional basis, and anyway that seems hard to come close to proving, especially as it’s such an extreme statement and there are *so* many providers and *so* many aspects to business (scheduling, professionalism, technology, speed, the list goes on and on). I’m not saying they’re great at all – I’ve had a few horrible experiences. But they also have provided far better services in some respects than others.
        If we went to Amazon to pay for “every” show we wanted, we’d be spending a lot more money. And we don’t watch sports.

    • Tatil_S

      >”So how is any creative group going to recoup the cost of production without the subsidy that is cable TV?”
      From international markets… Movies already get a large chunk of their revenue from international theaters abroad, sometimes more than the domestic gate receipts.

      Technology also reduces cost of production and distribution. I am not convinced that the supposed costs do not have any “fat” to squeeze anyways. This is an industry with a lot of middlemen and gate keepers. For example, the revenues of the recorded music industry has gone down dramatically in the last decade or two, but I doubt many people believe the artistic quality (and the quantity) of the end product is worse now than it was in the 80’s despite the big drop in profits for the major recording houses.

  • Kizedek

    [posted in wrong place; supposed to be reply to jameskatt]

    Could be a couple of different ways. Horace has already gone into them a little bit. There was the example of an Australian tv series, I think. Basically, one idea is that the content creator can pitch his show to an intended audience, much as he would pitch it to a producer/studio. Then he sells an app, and that acts in effect as crowd sourced funding, like kickstarter, before independent production begins.

    As far as skilled filming and production staff goes: as Horace I think says, talent will probably follow content, in the first instance, then money will follow.

    The advantage is that the content creator doesn’t have to worry about the studio messing with the content to water it down to lowest common denominator to appeal across a wide spectrum of viewers; instead, the content creator can stay true to his idea and focus on a specific audience with specific tastes.

    • James

      Crowdfunding is iffy because it’ll require a proven background on the people doing the pitch. Unknowns would flounder and not get funded.

      Look at the shows funded through Kickstarter. They have been produced but only with a signficant outlaying of financial support from the creators themselves as well.

  • anon_coward

    the current cord cutting wave that has been documented has been mostly people 35 and under who don’t watch a lot of TV. But in NYC i’m seeing what might be the beginning of a new wave that will start soon. a lot of immigrants pay for TV just to get the premium international channels in their language. every pay tv service has them. but in the last 3 years i have seen a lot of russian streaming services pop up and now i know people who are cancelling their $200 TV bills for internet and $8 streaming services

    these people don’t watch american sports or the tv shows for the 35 and under crowd but they are paying for them. and as they start to cut the cord it will put more pressure on production budgets

  • Dave McCloud

    Personally, I think the article is well researched, but making some erroneous assumptions and comparisons. The writer states that cable companies want to deliver a la carte programming. It’s actually the opposite. By bundling channels into packages, cable companies believe they can keep the ARPU (average revenue per user) higher than with a la carte, or at the very least, the user would pay nearly the same amount for less channels, lowering the perceived value of the service. I do believe a la carte will eventually become an option from all service providers, but I think bundles will still exist in an effort to provide value.

    He also makes a comparison to mobile vs. landline phones. There is a fundamental gap in those technologies that cannot be breached, whereas cable, being the top tier providers of high speed internet and possessing mature content and advertising relationships, actually possess everything they need and more to evolve. No doubt we are in a period of disruption where cable as we know it will be fundamentally changed (primarily that the delivery mechanism for TV will be all-IP, making no distinction between a cable TV provider and an online video provider), but I think the major cable companies will evolve and maintain top tier positions as content providers, as long as they can compete on two primary factors: UI and Online Content.

    As long as cable companies can keep pace with these two factors (and companies like ActiveVideo have technology that makes this possible), than they have several advantages over newcomers: the ability to discount high-speed internet when purchased with video content, the efficacy of maintaining one bill, the ability to deliver service through a managed network, their established brand equity, and as previously mentioned, their ability to provide the best content at the best price due to their established relationships with premium content providers and advertisers.

  • JohnDoey

    I definitely support the idea that cable TV costs too much. But I think this discussion should always be linked to reducing bandwidth charges as well, which are often coming from the same cable company and even more over-priced. Because we are moving towards a situation where consumers pay $100 per month or more for bandwidth that they mostly use to consume content, and yet they are going to pay much less than that — more like $10 or $20 per month, and in some cases $0 per month — for the content. In that case, the Internet has just replicated the CD and DVD, where most of the money you pay is going to people in offices instead of to people in studios.

    If you look just at Spotify, their business people and programmers are making over $100,000 per year while they say their company is too poor to pay artists for every play of their music. After 43 million plays on Spotify, the mega-hit “Happy” from Pharrell Williams only made less than $3000 — 1.5 weeks of Spotify’s programmer time — which is not enough to pay for even a fraction of the production costs of that song. And that is a mega-hit, not just a regular song that a million people really liked. So Spotify is a type of sweat shop. The Spotify executives and programmers got paid well, the ISP that shipped the bits got paid ridiculously well, but the artists and producers are not getting paid enough to cover just the production costs. It’s like the old scam of renting a worker a sewing machine for $20 per day and then paying them $10 per day for the garments they produce on that machine.

    So yes, cable TV was never meant to cost so much. But bandwidth certainly wasn’t meant to cost this much. Especially not when it is not even fiber or wireless. If a consumer is paying $100 per month for their Internet connection, I think 70% of that should be going to producers. Right now it is 100% going to record profits for ISP’s and at the same time, the content producers are literally going out of business.

    • Tatil_S

      That $3k refers to only songwriter royalties, for which broadcast radio pays nothing by law. He basically got paid $3k more than what he would have been paid if internet did not exist.

      • dajhilton

        Not quite right. All radio services have to pay songwriter royalties for every transmission of a song. They just don’t have to pay the recording artist or label anything. In the US. Radio does have to pay the artists and labels in virtually every other country.

    • dajhilton

      That’s the deal Pharell Williams’s label signed with Spotify. No one forced him to accept that low royalty. He can hold out for far more next time. At least it’s not Pandora where the even lower royalties Pharell receives are set by Congress, and not by the market. Now there’s an injustice.

  • tz

    My TV has been cold and dark for almost ten years. Nothing agains the device, but everything against what is being delivered by it. It is visceral rather than cerebral. Edited to be addictive and hypnotic. It is Cheetos and soda pop for the mind.
    For all the commercialistic and political propaganda that it delivers, in all honesty, they should pay me for the privilege of me allowing them to port that crap into my home.
    I loved saying to the Comcast lady when she asked the obvious rote question as to why I was dropping my service, I said without hesitation “because it is all bullshit”.

  • Spruce Cycle

    Think u forgot one of the most important part of TV/Cable watching is that it is habit and habits are broken and not disrupted.

    TVs and what pours thru them put very few demands on the user. U get home from a draining day of work and ur TV is there waiting to mind-wipe you in the hundreds of its channels. That they are “undifferentiated”–even better, less work on the viewers part–he/she can just surf those alpha waves into oblivion.

    • zornwil

      Right now that’s the disadvantage of most streaming services, the lack of click-button media readiness. That will change (and I realize it can already be done, but most consumers either can’t figure out how to so or find it too much effort to outfit their computing units with easy click-button and remote controls), but for now cable TV with a DVR elegantly fits for really casual viewing, especially for those people who wish to not engage with computing devices in that mode.

  • Just Yo

    My garbage disposal entertains me more better. (Excellent article, though.)

  • Laura

    Here’s a tale of one cable-cutter that cut back in 2008.

    I’m actually glad that I cut the cable when I did. Back in 2008, the History Channel was still mostly historical documentaries. The sci-fi channel was mostly sci-fi. The Learning Channel was mostly DIY and How-To shows. National Geographic was its own thing. I go to friends houses and see that every channel has shows that are pseudo or manufactured reality comprised of odd characters. That doesn’t interest me.

    In 2007 my bill went from $100/mo to $130/mo with no value increase. In fact, one of the channels that I watched regularly became a “paid extra” so I lost channels for that price increase. They were looking at another 30% increase the following year, so I looked at my TV consumption and saw that I only really watched FoodTV for Good Eats, The Science Channel, History Channel, and a few others. It wasn’t worth the proposed $166+/month.

    I still consume video content, but it’s more on my schedule. If I’m busy and can’t watch something, it’s still in my Netflix queue until I can. Or my YouTube subscriptions are still there when I have time to sit down and watch. I still miss some things on cable, but if I like a show enough, I can pay for that show specifically. The last 2 years I’ve bought the season of The Walking Dead for a fraction of what a single month of cable would be. And since I care about very few shows, it’s much cheaper to buy what I want.

    Even when you factor in the cost of high speed Internet, I’m still saving $100/mo if you compare my internet bill in 2015 against my total proposed cable bill in 2009. I’d hate to think what my total cable bill would’ve been today. I’d be over $200 with no channel that I find interesting.

    • dajhilton

      Think you missed the concept of what cutting the cord actually involves if you’re still paying for the shows you want to see.

      • scott

        No, you missed the concept that this is exactly what people are referring to with cord cutting in every conversation taking place about it, with zero exceptions. There are no cord cutters in any number that no longer have internet and don’t consume media through alternate means such as netflix etc.

        You also missed the manners 101 concept, btw.

      • zornwil

        Why would you not want to pay for the shows you want to see? Do you really prefer watching ads? Do you feel the producers, performers, writers, and so forth deserve nothing?

        People have LOTS of reasons for “cord cutting.” It’s not necessarily about getting something for nothing.

      • Walt French

        Take my comments with a grain of salt, as I seldom turn on the TV that only gets OTA signals and the occasional DVD.

        But a strong reputation or advice from a friend doesn’t make up for the fact that you commit a couple of dollars for the option to watch and the possibility that you’ll enjoy a show. With ads, you get a couple of minutes to see if you’re hooked by the time the first burst arrives, no? And you can of course bail out at any time.

        It’s not unlike the BWay tickets we bought before a recent show opened to really bad reviews. (We had our reasons & suspected it, even enjoyed the show. But still…) I think most TV shows give you far less reason to have faith in their quality.

        Another analogy might be a dinner out. The local paper (who has a critic we understand quite well) lists 100 places that are all worth making a date & maybe a drive just to eat there. Very unlike looking at a place & not liking the vibe, or wondering why a Kaiseki place is filled with random people off the street who look like they were just there because of 4+ stars on Yelp. Very few TV shows come with that strength of recommendation, from somebody who you know shares tastes with you.

        If I were to price pure PPV, I’d set a low price for the first 3 minutes, ramp it up over the next 15, and let the last part be a freebie; it’d let the viewer respond to the story arc but not worry about nickel-and-diming.

      • zornwil

        I’m not sure if my point was clear. I simply was saying cord-cutting is not necessarily and in my view ethically should not be getting free shows. If you watch something (discounting previewing or trying out, and without getting into the nuance of when that line is crossed), you should pay. Pure and simple. Pay people for their work.

      • Walt French

        There Ain’t No Such Thing As Free TV.

        I agree w your point but just trying to say why we have gotten ourselves beholden to a single (cable) company that sets prices in a way that only vaguely resembles the competitive free market we keep hearing is so wonderful.

      • zornwil

        Certainly I agree with that. I don’t understand the relevance to the earlier points and my response to @dajhilton:disqus , but I agree with it.

        PS – plus what you state is an excellent example of why people “cut the cord” other than @dajhilton ‘s notion that the “concept” of cord-cutting necessarily involves “not paying for the shows you want to see.”

      • http://www.ivpcapital.com/blog Michael Elling

        Well maybe if the comments and original article pointed out that cable was a way to get around issues with broadcast monopolies in more rural and tertiary markets, and were in turn local license monopolies, we wouldn’t be in this problem.

        All of these issues derive from the same misunderstanding on just about everyone’s’ part that monopolies are created and supported by government; be they access (wired and wireless) or content (copyright) or designs/protocols (patents). We need more academic research into why once a monopoly is granted it should always be shared; be it at layer 1-3 (access/transport), layers 3-6 (patents/software) or layers 7 (content/apps). Hand in hand with that should be a revival of understanding “inter-networking” effects and how terminating settlements (either north-south or east-west) can accrue to drive investment in those layers and end-points.

        It gets back to 2 simple concepts that we got terribly wrong in 1913; namely interconnection (sharing) and settlements that provide price signals and incentives for long-term sustainability (not stasis and decline as we have at present, but rather rapid and generative creative destruction) of platforms and ecosystems in the information economy.

  • Thorntondw

    The Cable/Satellite Pay-TV industry is like a dying dinosaur thrashing its tail in its death throes, its death is certain but the tail can still be deadly, be careful and watch it die. Apple is following a careful plan to profit when it dies but avoiding “poking it with a stick” while it is still alive.

    I have never had a cable or satellite TV subscription; i have used cable for internet only but use FIOS now. I started watching VHS in a souped up CompuAdd Turbo 10 with a TV card and EGA monitor in the very early 90s. Now I have Apple TV, DVD, FireStick and streaming via AirPlay. I can watch almost everything I want with only four low-cost subscriptions: Hulu, Netflix, CBS and Acornonline.

    I am enjoying watching the death throes of the cable and satellite companies. I hope they never wise up enough to avoid the death they so greatly deserve.

  • JimCracky

    If all that cord cutting becomes is a switch to broadband to consume more tv, then we have gained nothing for our efforts.

    • zornwil

      Which “we” and what is the gain that the “we” are intending?

  • Spruce Cycle

    TV 📺 watchers r morons.