Why Internet Television Isn't Quite Ready To Save Us From Cable TV

smaxp writes "It's no surprise that few people love their pay TV providers. In May, Variety reported that the American Consumer Satisfaction Index ranked cable television providers last in all consumer categories. Pent up frustration with cable and satellite TV providers fuels a steady buzz that Amazon, Apple, Google and Netflix will disrupt TV. These new entrants promise to offer variability in pricing and greater choice fueling notions that Americans have officially cut their proverbial cords. But true disruption is wishful thinking. Data from the PricewaterhouseCooper’s (PwC) global entertainment and media outlook for 2013-2017 doesn’t support a disruptive market scenario. Incumbent cable and satellite pay TV providers and over-the-top (OTT) challengers such as Amazon and Netflix are both forecasted to grow. OTT TV has only reinvented a single part of the TV business, streaming archival movie and television content over the internet replacing physical DVDs and time-shifted DVR replay of TV programs. To displace incumbents, OTT TV has to continue to change TV business models in ways that appeal to consumers and attract content owners. "

Comments

Of course Price Waterhouse...

[pigiron]

doesn't like internet TV. It's customers are the big Network and TV cable companies!

Piracy

[Highland Deck Box]

I pirate because the uploaders provide an infinitely better service than the cable companies or even Hulu/Netflix etc. I get DRM/region free ad-free files that work on any device, at great resolutions and quality, barely minutes after the episode has aired. Why the hell would I go back to their terrible services when that option is open to me? Now yes i'm not paying for the content, but often that's not an option anyway, (see The Oatmeal's comic on trying to buy Game of Thrones online). As has been voiced a million times, if these companies fired all their old idiot suits and brought out a 'Steam for movies/tv' that had all the added value that Steam brings it would take off like a rocket.

ESPN is the key

[Martin Blank]

I think the biggest player that keeps people locked into subscription TV is ESPN, and they know it. Everything else can be found via acceptable delays whether it's Netflix/Hulu/whatever, DVD release, or even torrents. But most fans still strongly prefer to watch sports live.

Most people I know who still subscribe would gladly ditch cable/satellite if they could stream ESPN even if it cost $20/month, which is far more than ESPN gets from the cable companies and would allow them to offer features they can't run through non-interactive media. The number of people who have cut the cord (or know how to) hasn't reached critical mass yet, but once it does, ESPN is either going to be able to start dictating higher fees from cable companies or will take a shot at streaming (or both). I expect a strong drop in the cable/satellite subscriber base in the first year after this happens, which will be devastating to their share prices because jacking up rates to make up for lost revenues and profits will just encourage more people to leave.

Re:ESPN is the key

[Drakonblayde]

Disclosure: I work for Comcast

You have no idea how much of your cable bill goes to pay ESPN, if you did, you would be sick. Let's just say that a $20/month streaming bill wouldn't actually be 'far more than what they get from the cable company'.

Sports channels are easily the biggest cost, and the biggest driver of increased costs.

Re:no shit

[Charliemopps]

I have an exclusive deal with the Pirate bay that trumps all those deals. Netflix, Youtube and Amazon are NOT the future of video. They are just extensions of the same relics the cable companies are. Internet killed the video star.

Re:Do sport fans age out?

[LordZardoz]

Interesting question. I am going to guess no. Sports are surprisingly tied to modern culture.

While it is clearly not 'high culture' in the way that Opera, art galleries, ballet, and such manage to, sports are surprisingly important to modern culture. Humans are competitive with one another. Sports are one of the few acceptable physical outlets for that. Competition in sports allow humans to compete with one another, either individually or in groups, without resorting to violence. Humans are tribal, and sports teams push several psychological buttons for people (belong to a group, and lets kick the ass of those other guys from across the river).

Individual sports may increase or decrease in importance over time, but I expect that some form of sports will continue to be culturally relevant and important as long as humans are both competitive with one another and want to impress women by showing off how dominant they are.

END COMMUNICATION

Re:no shit

[Bengie]

Because TPB has instant streaming, good recommendations, integrates as an instant streaming source for all of my house-hold devices, and has a lovely children's mode? TPB is only a good deal if you don't value your time or you just can't find something you want somewhere else for a decent price or ease of access.

Not so much

[rsilvergun]

if you've got kids, particularly girls, you're stuck. They all want to watch the same shows and the same night. I'm too broke for cable right now (When it hit $170/mo for Internet+tv I had to bail) and it drives my kid nuts. Sure, the shows might show up on Netflix, but it takes months. I can get them on iTunes, but it's so expensive I might as well buy cable (and I'm sure that's by design).

I know a lot of people will rant about Television being brain rot and all that, but for most normal people (hint: Not the /. crowd) TV is a social thing. It genuinely puts my kid at a social disadvantage that she doesn't have it.

Wrong spreadsheet

[EmperorOfCanada]

If you have 11 guys bidding on your 10 camels then you will get a great price. If 2 of the guys buy cars so you now have 9 guys bidding for your 10 camels then you are going to get hosed. This is the same situation combined with the fact that people are angry at being abused for a long time. Being forced to pay outrageous prices for crappy programming. Then spreading out the desired channels in to 4 different packages so that we have to buy all 4 to get the 5 channels that we only wanted. Plus commercials that drive us up the wall. Moving programs around based on this weeks insider political clout of the producer. Then cancelling shows when the political clout of the producer dropped below some imaginary threshold.

Then you get the ultimate competitor, piracy. Piracy set the bar as to what the consumer can have. Basically commercial free, on demand, and with no bizarre strings such as time-limits, device limits, or weirdo delays for countries that aren't the US. All this plus it was almost free. The two gate charges were that you had to mess with torrents, and you once in a while get a dud. But Netflix showed that there is a business model that can compete with piracy. Month after month they get money from people who are now getting nearly all the benefits of piracy with none of the downsides.

Is Netflix the be all and end all? Probably not. One great quote I heard went like this, "Will Netflix become more like HBO faster than HBO will become like Netflix."

There are exceptions. Nightly news. Live sports. And highly topical TV such as Big Brother. Those don't quite fit the download netflix model.

Now where this whole thing breaks down is that I suspect that the big producers are all going to think, "Hey we can build out our own netflix with our giant library." They are wrong. If you open up your overpriced hotdog stand next to McDonald's that just went all-you-can-eat you will do 1/1000th of the business. These other companies have little hope of becoming even Pepsi to Netflix's Coke. People aren't going to drop cable to discover the wonders of Netflix at under $10 month only to start tagging on Disney, Warner, Sony, etc bringing them back up to their old obscene cable TV bill. Maybe people will subscribe to 2 services but with their all-you-can-eat libraries growing and getting better why would you need 3+ services?

The one I can't figure out is iTunes. Why would anyone buy anything that you can get on Netflix for the price of many months of Netflix? The prices on iTunes are bonkers.

Re:no shit

[AK Marc]

The web companies are adopting business tactics networks have used for decades, while demanding free access to the cable to your house,

You lost us with the lie about demanding free access to the cable to my house. They demand equal access to the cable to my house that *I* pay for. When my ISP sends me a check for all the ads I've viewed, then I'll listen to that lie. Until then, I'll consider an ISP blocking access to content to be fraud and a breach of contract, not a fair move to block the greedy content companies. Who, incidentally, pay for their access to the Internet.

Flamebait article

[Camael]

If you read TFA, you will find his claims are contradictory.

First it states the premise:-

To displace incumbents, OTT TV has to continue to change TV business models in ways that appeal to consumers and attract content owners.

So far so good. Then it states the facts relied on to suggest OTT TV doesnt appeal enough to customers :-

In its June 2013 Cross Platform Report, Nielsen reported that the average consumer watched over 157 hours of traditional television per month. Nielsen also reported that the average consumer watched only 3.8 minutes per day of OTT TV or about 2 hours per month. If all 11 original TV series from Amazon and Netflix appealed to the average consumer and he or she watched one hour from each series per week, original OTT television content would amount to 44 hours in an average month. The consumer would be left with 111 hours per month of unsatisfied television viewing appetite without cable or satellite pay TV. OTT TV challengers don’t have the economic scale to create or acquire enough content to replace incumbent pay television providers.

Note the assumptions- It assumes that "average consumers" must watch 157 hours of traditional television every month to be satisfied. The article very carefully never explains why it thinks this is a valid assumption. Do we even have any numbers to show that those who watch 157 hours of traditional television every month are happier with their service than those who watch less?

The irony is that right at the beginning of the article, it admits that

"In May, Variety reported that the American Consumer Satisfaction Index ranked cable television providers last in all consumer categories."

So we do know that customers of cable companies are very unhappy with their cable service. This directly contradicts his assumption that"average consumers" must watch 157 hours of traditional television every month to be satisfied, since on average they are obviously unhappy even after watching that much.

This is a badly written article trolling for hits.

Re:no shit

[green1]

The "HOW" part isn't that hard... They could switch to a video on demand model allowing you to choose only the individual shows you want, when you want them and available worldwide at the same time.
The problem isn't "how" to compete, it's the realization that they have to compete... that's the part they haven't got to yet.