By: Isaac Camel
For years cable companies have taken advantage of their customers, and continue to do so. But with new competitors coming into the market, cable providers are getting worried. In the next ten years, the whole landscape of television will change.
Let’s face it, no one truly likes their cable provider. Cable providers are continually ranked as one of the most hated businesses in the US. This has become the norm in the US, which is sad. Television is one of the biggest markets that the US has to offer and its consumers are treated extremely poorly. Why? I’ve compiled a small list of why people hate their cable provider.
No Loyalty Programs
Anyone would think that the longer a customer stays with a certain provider the lower the monthly bill would be, or they would receive better service. The truth of the matter is, actually it’s the complete opposite. Cable providers punish customers that stay with them for over a year. They do this by attracting new customers with low monthly rates. In the fine print of these arrangements, it states that this low price is only for the first year. Then they double, and sometimes triple the original monthly price.
When customers find out how bad their service is, they try to call the company and figure out why and they are faced with a new challenge. Everyone has heard some of these horror stories about how bad Comcast’s customer service is. Which makes it extremely difficult to cancel these subscriptions at the end of the day.
In some parts of the country, customers lose the ability to choose among different services in the area. These customers lose the freedom to choose between bad and worse companies. And once they’re forced into an agreement, they can’t change services no matter how high the prices get.
The biggest thing I dislike about cable providers is their horrible channel packages. They know which channels the average consumer wants to watch and which ones they don’t want to. They combat this by offering channel packages. By spreading out popular channels between packages they can up sell popular channels in the more expensive packages.
What can people do to combat this uneven power struggle between T.V. providers and consumers? The biggest threat to these providers is streaming. A streaming service is an on-demand online entertainment source for TV shows, movies, and other streaming media. These services provide an alternative to cable and satellite on-demand service, often at a lower cost. Use of streaming services often requires fees, either per view or subscription. The videos come from an internet connection that is typically cloud-based. Streaming features wide support for numerous devices such as smart TVs, streaming media receivers, computers, tablets, and smartphones.
Streaming has become the Kryptonite to cable providers. More and more people are “Cutting the Cord” and becoming exclusive streaming customers. In the last quarter of 2018 1.1 million people canceled their cable subscription and moved to streaming. Netflix alone has over 146.5 million paid subscribers worldwide. Why has streaming become so popular?
The Traditional way of consuming television is being chained to the TV schedule. Meaning that the schedule would decide the when and where you would be able to watch programs. Streaming means you can watch all of your programs whenever you have time to. This also creates the ability to watch wherever you are also, as long as you have a network connection.
Many Streaming services allow consumers to choose the features and functions they want to pay for. Consumers can effectively pay for the content they want to watch and forego payment for programs and services they don’t want or need. Video streaming apps and video stream services make recommendations based on viewing profiles. This creates a personalized heap of recommended content that is targeted toward the consumer’s interests.
Millennials and Generation Xers are leading the way when it comes to the move toward alternatives to cable TV. Sixty-one percent of Millennials watch live video, and streaming services put that capability in the palm of their hands. Overall, fifty-nine percent of the U.S. adults say cable is their primary means of watching TV, while twenty-eight percent say streaming services are. This number is high because of the adults between fifty years old and higher haven’t adopted the new technology, and most likely won’t. But, that demographic is declining and the eighteen to twenty-nine is steadily growing.
The bottom line is the bottom dollar. While convenience and personalization are major drivers in the shift toward alternatives to cable TV, most budget-conscious consumers are choosing to cut the cord to save money.
You might ask yourself “What’s Next?” the answer is complicated. There is no way to see the future perfectly, but looking at trends I believe there are three options that will happen. The first option I believe might happen is everything will go to Season Drops. The second option that might happen is everything becomes “a la carte” week to week. And the third thing that might happen is a mixture of the two previous options. One thing I wholeheartedly believe will happen is traditional cable will die. There is just no way that the traditional model will continue to work with all of the new technology around today. We are less than one generation away from cable guys fading away to the same route as Milkmen.
Option 1: Season Drops
Season Drops for lack of better words is when streaming services, like Netflix, drops an entire new season of content instead of an episode on a weekly bases. Season drops encourage its viewers to binge watch seasons at a time. Binge watching is when people watch multiple episodes of a show in rapid succession. There have been multiple studies that show extreme binge-watching isn’t healthy for a person to do. Because Netflix can’t regulate how many episodes a person watches at a time, I won’t go into detail about the health risks. But there have been some studies that doing season drops devalues the show. In conclusion, the study showed that people who binged watched a certain show retained more memory of the show less than those who watched it once a week. It also showed that the enjoyed the show less than those who spread out viewing.
This is a tricky situation for services that do season drops compared to weekly episode drops. Streaming has promised all the benefits of having every episode at the fingertips of the user. So, how can a streaming service not drop the whole season if it has it already made? This is the question that consumers will ask if streaming changes to weekly drops instead of season drops. There are some services that can get away with weekly drops (HBO NOW). But, they can get away with this because they initially were a traditional cable network. Netflix, on the other hand, can’t drastically change the way they drop content. Since they started making their own content they have dropped whole seasons at a time. And customers have gotten used to them doing it, overall it would hurt the company more to do weekly drops than season drops. It also makes sense to put out as much content as they can at a time because they don’t have a set schedule they need to run off of. This goes back to why people like streaming, because of the convenience. Consumers know that they don’t have to be on their platform at a certain time in order to watch a new episode.
Option 2: A la Carte (Weekly Wait)
A la Carte refers to a menu at a restaurant when a person can order each item of food as a separate item rather than part of a meal set. When I say “a la carte” I mean where a customer can pick and choose each channel he or she wants and doesn’t want, and that’s all they pay for. Conservatively the average American watches roughly twenty channels each month. From the chart below let’s say the average cost of a non-sports or news channel is $1.50 taking into account the cost of running services and customer service. As of right now, cable TV providers cover the cost of infrastructure and customer service.
Looking at sports FOX Sports 1 charges $1.30 a month and ESPN charges $7.86 a month. This is because networks know that live sports are one of the few things they can actually sell ads for because people like to watch them live. But, besides those two channels on average every other sports channel costs less than $1.00 per month. To reduce risk, and make the math easier we’ll give FS1 $2.00 and ESPN $8.00, and all other sports networks cost just $1.50 a month. If a person wanted all of the ESPN channels (ESPN, ESPN2, ESPNNEWS, ESPNU, and ESPN Classic), Fox Sports 1, BTN, and CBS Sports. They would cover all of the major sports networks and would come up to around $20.
If you didn’t want sports channels and you picked 30 channels, which is more than the average person watches in a month. Each channel costing $1.50 per month. That would make it $45 a month. If you wanted to mix and match sports it would be a little bit higher than $45 but that is still a lot less then what cable costs now.
How is this not a thing already? The basic reason why TV networks don’t do à la carte is they would rather force you to pay for 10 channels you don’t want for one that you need. For example, if some network wants to provide ESPN, Disney makes them provide a lot of other Disney-owned channels. The same goes various other networks if you want the big name channel you have to also provide the smaller ones.
Depending on how you look at it, if a true a la carte TV happens it will make a lot of the smaller niche channels that a lot of people don’t really watch close. But, if the channel knows its target market and knows how to thrive inside of the long tail it will continue to be successful. Cable TV companies and networks can see what is coming down the road, but they still push high priced bundles because they don’t care if you really watch the channels or not. They get paid no matter what with a bundle. Once a la carte TV becomes a reality networks’ will be forced to care if you watch the network. If you don’t watch the channel they won’t get paid. That will force these networks to change their strategy in which they had a clear advantage for a long time.
Option 3: Mixture of Both
This is the option that will most likely happen in the future. There will be companies that exclusively do season drops and some that will do weekly drops. What is already starting to pop up now is services that do both. Sling TV and DirecTV Now are streaming services that offer basic channel packages of live TV as well as add-ons that you can pick and choose to pay for or not. This is what the traditional cable companies are trying to put out instead of giving us what we truly want. They are marketing these services as “a la carte” but honestly, it’s the cable providers trying to push bundles onto consumers again. Which I think this will work for a short time, then streaming service will start to offer live TV bundles similar to Sling TV and DirecTV Now. Until people realize they should get rid bundles altogether. Then a true a la carte market will open up and consumer’s monthly bill will go down immensely. This is when streaming will be at its apex, some services providing live TV scheduling and some providing season and weekly drops. But what will make it beautiful is that for the first time consumers will be in charge of what he or she wants to pay for.
Television is moving over to the internet, and it’s happening soon. But there are also some questions still floating around the air, one of the biggest questions is “how will advertisements change?” With services like Netflix and HBO Now offering content without ads, it’s hard to see how viable that is. To find the answer I believe we need to look back at the early days of music streaming. Spotify and Pandora used the freemium model. They keep the standard platform free to users but they insert ads during breaks. This is a model that some video streaming services use with a few tweaks. Hulu for an example make their standard platform somewhat cheap, but it has ads. Then, the premium doesn’t have ads but it cost more per month.
Jeff Green who is the founder and CEO of The Trade Desk said this about ads in streaming services:
“Ultimately, TV will come to your house over an Ethernet cable, not a coaxial cable. All TV will be delivered over the internet, because it’s better. Everything will be on-demand, like Netflix. Just like today, most of internet-fueled TV will still be ad-funded. There will be a few no-ad channels, just like Netflix and HBO are today. But most TV content will be ad-funded, and there will be far fewer ads than there are today. The ads will be tailored to you. As consumers, you’ll actually like the ads, because they’ll appeal to you about products you love or products you don’t know about, but will love. These impressions will cost advertisers more per ad. Publishers and TV content creators will get a great cut of every ad dollar. And the global ad business will grow?”
Steaming has a ton of different marketing implications and it is extremely important to look at them. The only thing that won’t ever change is Content will only Survive if it is Profitable. Giving consumers the option to skip ads completely is cutting into profits. This puts advertisers into a paradox. On one hand a lot of consumers are electing to skip ads completely. On the other hand, it is allowing advertisers to gather more data on the viewers. Making it easier to put them into specific audiences based on time, platform, and mood. Then they can show more personal tailored ads towards the viewer. The marketers that will be successful are the ones that turn this constraint into a positive and find a way to connect to the viewers. Either way, marketers are going to have to become more creative in order to catch the views attention.