Oh dear dear, in case you have been living in a cave and haven't kept up with current doings, Netflix, the one-time Wall Street darling and probably the marquee Internet streaming service, has fallen on some tough ass times. As the cost of its content dramatically increased, the bumbling Netflix raised prices. Customer backlash was predictably significant. The desperate company lost about 800,000 customers in the third quarter from its roughly 25 million subscriber base. As most everybody knows, Netflix offers movies and some TV shows for streaming. Hulu Plus, which is partially owned by TV networks, offers popular TV shows. But there are other over-the-top services, including Amazon’s video on demand or iTunes downloads. There are also Internet streaming boxes from Roku, Apple TV and others. Yet today, pay TV providers largely have dismissed over-the-top Internet video as a threat. The overall number of households with pay TV from cable, satellite and telephone company services has held up pretty well in the past 12 months. Why is this so?
It would seem to me that, at long last, pay TV providers have recognized that at least a portion of their subscribers want to watch video on their computers, tablets and smartphones. So, guess what? They’re starting to give it to them. What a novel idea! Several cable companies, including Cox Communications and Time Warner Cable in San Diego, allow subscribers to view content from the Internet on devices other than TVs — as long as they’re subscribers. These services have been dubbed TV Everywhere. “Rather than be afraid of over-the-top, the pay TV providers are just integrating it,” Mike Paxton, an analyst with industry research firm In-Stat. said. “Eighteen months or a year ago, there was some genuine concern among pay TV providers that over-the-top was causing them to lose subscribers. Now that concern is pretty much gone and the thought is, ‘Hey, we need to integrate this type of experience into our services.’ ”
But the stubborn fact remains; if people don’t have an interest in paying their monthly cable bill anymore, they now have an alternative that they didn’t have five or 10 years ago. “It does require some sacrifice. You don’t trade your $70-a-month pay TV package for a $20 combination of Netflix and Hulu Plus and get access to exactly the same thing,” said Ian Olgeirson, senior analyst with SNL Kagan, an industry research firm. “Maybe the content isn’t as fresh. You lose access to certain content.” Still, young adults, such as recent college graduates, may be less inclined to sign up for pay TV because they’re used to getting video over the Internet, Olgeirson said. These people aren’t cord cutters but they are substituting Internet video for pay TV. SNL Kagan estimates that over-the-top substitution, which includes cord cutters as well as people who never signed up for pay TV, will grow from 2.5 million households to 4.5 million households by the end of 2011.
Pay TV providers have rolled out TV Everywhere to combat over-the-top rivals. Cox Communications in San Diego, for example, offers Cox TV Online. Subscribers can indeed access certain shows from their TV package, as well as Hulu Plus, on computers, tablets and smartphones no matter where they are. The programming is streamed over the Internet and password-protected. Ryland Madison, director of broadband marketing for Cox, said the company believes most people still want to watch most programs on a big-screen TV in their living room. Since Cox TV Online was introduced in May, it has had a modest number of users. “We see it more as complementary — an added value to our service,” he said. Time Warner Cable offers an iPad app that allows customers to access their cable programming via a Wi-Fi connection — but only in their homes or yards. “It’s really kind of a defensive strategy” for pay TV providers, Mark Kersey, head of industry consulting firm Kersey Research Strategies said. “They don’t charge for it. They’re investing in a technology that is not going to provide a direct return. It’s more about preventing subscriber loss.”
What are your experiences? Have you cut the cord for a period of time or full time? Do you think this is the future and are the TV execs on the right track? Please feel free to email me with you thoughts, I always enjoy your insights.
What are your experiences? Have you cut the cord for a period of time or full time? Do you think this is the future and are the TV execs on the right track? Please feel free to email me with you thoughts, I always enjoy your insights.
