Cutting the Cord: It’s Not What It Used to Be
In 1996, I spent hours on the couch next to a Windows 95 PC waiting for a 15-second video clip to download from Comedy Central’s website. It was a promo for South Park, and the first “real television” I can remember watching ‘on’ the internet. Today, much longer videos seem to pop up and begin playing on their own everywhere you look — on your computer, on your phone, on your television — all streaming down from the internet at a speed so fast that we no longer have to be choosy (or patient).
Wow, have we come a long way.
The Good Old Days
When I ditched cable in 2008 after being surprised by a $300-plus bill at the end of a long promotional period, I was feeling pretty good about myself. I had pared down an expensive cable package to an internet-only plan that cost less than $40. As far as television entertainment, I was now down to $8 a month. From over $300.
At the time, $8 is what it cost for a standard Netflix plan that included 3 DVDs out at a time as well an increasing number of titles available to stream online. Hulu didn’t even offer a paid subscription plan yet, so I watched as much as I wanted with short, 15–45 second commercial breaks. At first I simply connected my laptop directly to my TV, but in time I picked up a first generation Roku device for less than $100. With the Roku came even more free entertainment options.
From almost any standpoint — cost, simplicity, quality — I found it a great success. The cost benefits were obvious and immediate, recouping the cost of the Roku streaming device in a single month. As someone who was unknowingly on a path to minimalism, I loved the simplicity of the Roku device and the low cost of the services I used. In terms of quality, I could now binge popular shows like “24” commercial-free.
Keep in mind that most of this was happening via DVDs that were as ubiquitous at the time as Amazon boxes are today. Netflix made checking the mail fun again with shiny red envelopes providing a beacon of excitement at the end of a long day. This may sound silly today, but at the time (legal) online streaming was almost nonexistent, and pirated videos were downloaded as files. The ability to actually stream video on demand was revolutionary at the time. When I cut the cord in 2008 I had already been hooked on Netflix’s DVDs for years and titles available for online streaming were a pleasant bonus.
Also consider the market Netflix entered. Blockbuster was king, but their profit model was contingent on collecting late fees. In 2000 Blockbuster collected $800 million in late fees alone. Netflix offered more than convenience: they offered redemption to anyone who had ever laid out a ridiculous pile of cash to Blockbuster for a movie that sat in the back seat of the car forgotten for two weeks. To sign up for Netflix was to kick sand in Blockbuster’s face, and boy did it feel good.
Canceling cable used to be about getting rid of a bloated monthly bill or having the control to watch movies and shows commercial-free. It was a liberating move pioneered mostly by recent grads with steep student loans and tech-savvy consumers who had already been hooking up computers to their TV for years. (This practice was popular enough for media PC’s to enter the consumer market and for Microsoft to launch Windows XP Media Center Edition, an OS optimized for television viewing.)
Today, however, its beginning to feel more and more like we’re trading the underlying technology — from digital cable to internet streaming — but keeping the same old channels and the same old players. Even more alarming, we seem to be edging back toward the same old prices.
Bottom line, cutting the cord doesn’t mean what it once did.
The ‘Trinity’
The early days of video streaming have been unquestionably dominated by Netflix, Hulu, and Amazon Prime. Looking back on the moves all three made suggest the versions of these services we see today have been years in the works.
A major landmark for Netflix came in 2011 when they increased subscription fees by 60% and split the online streaming and DVD rental services into two separate subscription models. (They initially planned on spinning off the DVD rental business under the name Qwikster, but this was abandoned after losing one million subscribers). After allowing some time for the stink to dissipate, they gradually separated the two services as much as possible anyway, while keeping the Netflix brand on the DVD rental service. Their streaming service had gone from a ‘bonus’ to a beast of it’s own that could begin seriously investing in content licensed for streaming.
Meanwhile, Hulu had launched premium subscription service Hulu Plus in late 2010. You could still watch Hulu for free from a desktop or laptop computer, but the premium service was required to stream over mobile and streaming devices and to access additional content. Hulu distinguished itself by offering new episodes of prime-time television shows the day after they aired, opening the door for many to opt for both services. With the cost of Hulu Plus and Netflix’s streaming-only plan at $7.99 each, subscribing to both was still monumentally cheaper than cable television.
Amazon experimented with various video services as early as 2006, but in 2011 their first iteration of Prime Video put them into serious contention with Netflix and Hulu. While their initial offering of 5,000 titles was small and highly duplicated on Netflix, their customer base was already there in Prime subscribers. Overnight, millions of Amazon customers had a new streaming service they had already paid for and at a minimum it gave a valid reason to question subscribing to alternative services.
Of course we can’t forget YouTube over in the corner considering they actually dominate market share, even if they’re in a slightly different market. Sure, they feature primarily user and hobbyist content and many of their paid subscriptions have done poorly, but the fact remains that they boast 22 billion visits per month and host two of every three video views on the internet. Long before attempting any type of paid subscription model, YouTube began to bloom with a variety of high-quality, independent web series. The fact that it was free didn’t hurt, particularly when streaming devices took it from the laptop to the TV screen.
I always felt that once these services became more mainstream it would be time to harness that leverage and start ramping up subscription fees. I saw how powerful Netflix could be and in my mind they played a large role in Blockbuster’s demise (In addition, of course, to Blockbuster’s unwillingness to fully embrace DVD rental through mail or online streaming. Oops.) Even with the rising popularity of Hulu, Netflix seemed an early front-runner and for my money the absence of commercials was a huge selling point. Still, the cost of all three services combined was (and is) a fraction of continually rising cable television rates.
What I did not anticipate was how many would be edging for a seat at the table.
Online Streaming Frenzy
In the last couple weeks Disney finalized a purchase of Fox’s film and entertainment divisions for $71 billion and Apple announced a new video streaming service with an entourage of Hollywood players in tow. Disney already has a streaming service in the works for later this year called Disney+ and NBCUniversal plans to launch it’s own streaming service next year. AT&T has leveraged it’s new holdings to launch video streaming services WatchTV (a limited channel line-up free for AT&T cellular customers and cheap for others) as well as DirecTV Now, a more substantial offering which just received a hefty bump in subscription fees.
These media powerhouses join services that have already been around the block. While they don’t enjoy the market share of Netflix, Hulu and Amazon Prime, services like Sling have been offering “Live TV” packages for a while now, essentially duplicating the experience of traditional cable television. While channel-surfing through shows already in progress may seem antiquated for those who have been on the streaming bandwagon for a while now, these services tend to cost far more than “on-demand” services like Netflix and Amazon Prime.
One of the least expensive, Philo, offers a basic package of 44 channels for $16 per month. Sling and FuboTV offer slightly larger packages starting at $25 and $45 per month, respectively. In 2017 YouTube TV was launched and they officially entered the traditional TV streaming game. Hulu has also added a new plan that includes “Live TV” at a comparable $44.99, and given it’s large subscriber base, it has taken off nicely. As far as the antiquated “channel-surfing” feel, most providers offer a cloud “DVR” service that allows customers to choose what to record ahead of time.
Is this beginning to sound more like old-school cable yet?
The good news is that all of this competition helps keeps subscription costs in check. It’s not a coincidence that Netflix and Hulu subscriptions have remained so close for so long. Also, if you have been living without cable television for years like I have, the expensive live television packages that are emerging are probably of little interest anyway.
The bad news is that many streaming services are emerging more like “channels” than as broader content providers. One of the most significant moves that early players Netflix, Hulu, and Amazon Prime made was the procurement and in-house development of original content. As internet streaming devices gained popularity, all three major services began offering shows that could only been seen exclusively on their streaming services. Early successes like House of Cards helped streaming services differentiate themselves and in many cases caused consumers to subscribe to more than one service.
If you want to watch the lastest Orange is the New Black, you’ll have to subscribe to Netflix. Sneaky Pete? You’ll need Amazon Prime. If you just can’t live without a dark Hugh Laurie in Chance, you better be on Hulu. This has been a fact since the trinity began original content, but these are quickly becoming the meat of the service rather than a bonus incentive.
There is a reason that Netflix can afford to spend $15 billion a year on original content and why they’re fairly confident in their goal of 50% original content in the next year or so. Netflix has been dropping shows left and right. The iconic sitcom Everybody Loves Raymond was ditched in 2016 along with a host of feature films. Many other fan favorites such as M*A*S*H, Bones, and Futurama were quietly removed from Netflix after a deal between 20th Century Fox and Hulu.
Now consider all of the companies with streaming services that are either gaining traction or planned to launch in the next year, such as Apple, Disney, Time Warner and YouTube. If we find ourselves with a dozen major players producing original content, we may see a landscape where most new content can be found on only one streaming service.
In addition, as content owners begin launching their own streaming packages, we can expect to see titles slip from their competition as contracts are not renewed. Consider Disney and their newly acquired 20th Century Fox (which holds a mind-boggling content library in it’s pocket). Why license content to your competition when you’re trying to build up subscribers to your own service? The one possible exception may be Disney’s controlling share of Hulu, who could benefit substantially as a result.
It’s Just TV
Cutting the cord has definitely gotten a bit more complicated. This may just be yet another sign of today’s marketing to a new generation that has helped to bring minimalism into the mainstream, but in a form that seems to have forgotten the ideals of “simple” and “inexpensive.” Those who cut the cord for the simplicity and low cost will likely go on without much of a change — and really we’re not losing much by doing so. As it is, research shows that having too many choices is actually bad for us and is a detriment to our happiness.
If you’re the type of person that likes to keep up with all the latest shows and dominate the morning water-cooler talk, on the other hand, you may be nearing a future where a variety of streaming services begin to add up to just as much as your old cable bill — or more.
