file photo shows a cable box on top of a television in
Philadelphia. Cord cutters rejoiced last week after HBO and
CBS announced plans to sell stand-alone streaming services,
a move that cable and satellite television providers have
resisted for years. But cutting the cord won’t mean
cutting out your cable provider, and some would-be customers
may balk when they see just how much paying a la carte
NEW YORK — Cord
cutters rejoiced last week after HBO and CBS announced plans to
sell stand-alone streaming services, a move that cable and
satellite television providers have resisted for years. Customers
tired of paying big fees for hundreds of channels they never watch
just to have access to a few favorite shows might be expected to
start cancelling cable service in droves. Get Netflix, throw in
HBO, add a network here and there — why would anyone sign up now
Well, don't sound
the death knell for cable companies yet.
customers may balk when they see just how much paying a la carte
actually costs. Stations that offer services a la carte will have
to pay for marketing that the cable and satellite companies
usually cover. Fewer eyeballs on live TV could mean less
advertising revenue, since online ads are generally cheaper, and
that will boost the network's cost of running the channel. And
smooth streaming costs money: to avoid so-called
"throttling" during peak evening viewing times, Netflix
buckled to broadband distributors like Comcast and Verizon and
paid up so that its streaming service would run at a higher
bandwidth and work more smoothly. Those added costs might be
passed on to customers.
And for all those
cable haters out there, sorry: Cutting the cord won't mean cutting
out your cable provider. They often own some of your favorite
channels (Comcast owns NBC Universal, parent of Bravo and USA) and
in most areas they are the gatekeepers to the Internet. Offering
popular channels like HBO over streaming could actually help cable
companies sell more expensive broadband services to customers.
business is evolving from mainly selling you a pay TV package to
mainly selling you a broadband Internet service," says FBR
Research analyst Barton Crockett. "Content companies and
cable companies are evolving from being very worried about making
their content available through Internet services to very excited
about that. It's a way to sell their Internet and get people to
pay for faster speeds."
The cable and
satellite television industry is going through major
consolidation, to mitigate the higher cost each year of carriage
fees that the networks charge for their channels and boost pricing
power. Comcast Corp. is in the process of buying Time Warner Cable
Inc. for $45 billion, which would make it by far the largest TV
and broadband provider. AT&T Inc. is planning to buy satellite
service DirecTV for $48.5 billion. Both are under regulatory
review; customers complain such deals would create monopolies that
would hijack choice.
subscriptions have flatlined at about 101 million, according to
data from research firm SNL Kagan. The number of high-speed
Internet subscribers rose about 1 percent during the same period
to 90.1 million. By comparison, pay-TV nemesis Netflix Inc. has
about 37.2 million U.S. subscribers and expects to add 1.85
million during the final months of this year.
The growth in
streaming services will appeal "to a segment of consumers
that the traditional pay-TV providers have a harder and harder
time communicating with: the millennials and so called 'cord-nevers'"
who haven't viewed Pay TV as a compelling option until now,"
says MoffettNathanson partner Craig Moffett. In fact, HBO said its
stand-alone HBO Go service is largely aimed at the 10 million U.S.
households that have broadband Internet service but do not pay for
So as more
channels start to offer a la carte services, cable providers will
shift to focus on their broadband services, Moffett thinks.
companies will become increasingly reliant on broadband, and
gradually evolve their business models to be less and less
video-centric and more broadband-centric over time," he said.
That leaves satellite pay-TV companies like DirecTV and Dish
Network Inc., which have no broadband capability, as the "odd
man out," he said.
say they want to offer customers more choice, and if customers
want to go online, they plan to be a part of that transaction.
overwhelming majority of our customers prefer to access video
content via digital cable bundles for convenience, service quality
and value of the total package, but cable broadband provides the
fastest and most reliable connection to online content for those
who choose to access it," says Todd Smith, spokesman for Cox
Communications, which offers cable and broadband to 6 million
Other cable and
satellite services did not respond to a request for comment or
declined to comment.