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Wednesday, November 26, 2014

Will Streaming Kill the Cable Bundle?

Several weeks ago, HBO announced that it would launch a “stand-alone, over the top HBO service in the United States” during calendar year, 2015. Essentially, you could watch HBO for five dollars a month streaming on to one of your devices without the expense of a cable subscription. The press had a field day with the announcement and I received dozens of e-mails about it and the possible implications for the cable industry. I thought that it was wise to wait a few weeks and think about the issue and also talk and e-mail a number of media analysts about it.

For years, in passing, a few dozen individuals have told me that the only reason that they subscribed to cable was HBO. I always would nod and smile but also observed that sometimes the programs that they discussed were on Showtime or in Mad Men’s case, AMC, not a premium channel. Additionally, they also mentioned some over the air series that they liked and sports would often play a part in the discussion.

So, if a free standing HBO is offered, will cable get hit with a million plus defections in 2015 solely do to the HBO gambit? I am a bit skeptical. Each month, many thousands of people “cut the cord” and abandon cable. They use some mix of Roku, Netflix, Hulu, Apple TV and even You Tube to fulfill their video needs. Some do it as they truly do not watch much TV and others do it out of economic necessity.

In the November 9, 2014, edition of the Sunday New York Times, there was an excellent article entitled “TV Shrinks to Fit.” The article illustrates how many members of the wired generation do not even own TV’s. They lead busy lives and still love TV. Yet, they watch it on a device. The group is very well educated, many earn very good money, but a television or cable subscription does not fit in to their lives. Interestingly, the majority tend to be women. Young men still have TV’s, often with a large screen, so they can watch sporting events.

So my theory, and I do not have a lot of allies in this regard, is that HBO will actually pick up substantial numbers of these internet savvy upscale young women who never had cable in the first place (see Media Realism, “Does Zero TV Signal The Winds of Change for US Television, May 16, 2013).

As many of you know, I also do some lecturing to college students. Many men expressed great enthusiasm about the rumor that ESPN was considering a stand-alone product delivering all of their platforms via a streaming alternative for approximately 30 dollars. “I would dump cable in a New York minute,” a young Brooklynite told me. When I suggested that the NFL would no longer be available to them, a few young men said they would stick with cable and as, one put it, “continue to get ripped off.” One enterprising fellow said he would cut the cord, go the ESPN streaming route and show up at buddies apartments on game day. “If I bring a six pack of good beer, they will welcome me,” the personable young fellow said.

Many said they would spring for the CBS five dollar streaming deal but backed out to a man when I told them that CBS Sunday and Thursday football was excluded.

So, the Cassandras are not thinking this issue through in my opinion. When could stand alone streaming alternatives really hurt cable? To me, it would hit if many channels aped the HBO offering successfully. If ESPN follows suit (for far more than $5) and is joined by other players, consumer behavior may truly shift. Viewers could cobble together their dream team of HBO, ESPN, NFL, Netflix, Hulu and God knows what and save substantial money over their current cable package. As someone told me yesterday, “I pay for 250+ channels and I only watch six. Buying channels a la carte has real appeal to me. I get my news online. Most of cable is a waste to me.”

It will be great fun to see how this unfolds in the next 24-36 months. As I often say--expect to be surprised.

To my American readers, may I wish you a very Happy Thanksgiving.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

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