Is 2012 the year people break the Cable habit?

Will this be the year you break the cable habit and move entirely to getting your “TV” entertainment over the Internet?  The Wall Street Journal’s Kevin Sintumuang has.  For those who watch a very limited amount of  TV, have a great Internet connection, and can either do without live sports coverage or can pick enough up over the air, it is a fine option.  For the rest of us though the conditions aren’t yet ripe to make the move.  I think the trend away from traditional cable towards Internet-based non-sequential programming continues to spread slowly for about five years and then hits the knee of the curve.  But it’s at least a decade before Cable truly starts to fade into the sunset.

Cable has two problems.  The biggest is that it forces you to pay for a lot of programming that you never watch.  My favorite personal example was receiving a letter from my then Cable company announcing that we were getting five more channels and as a result our monthly cable fee was going up.  Those channels consisted of three more home shopping channels and two Spanish-language channels.  We don’t watch home shopping channels and we don’t speak Spanish, and since we couldn’t opt-out of this change it was nothing more than a (substantial) price increase.  That was 15 years ago, and that trend continues so that now we have hundreds of channels but there is “nothing on”.  Not only do Cable (and Satellite) companies keep adding channels few want, and raising prices to cover them, but existing channels blackmail the Cable companies.  Want to carry Channel X then you have to carry (and pay for) Channel’s W, Y, Z, A, B, and C from the same company (e.g., NBC Universal or Disney or…).  Or, pay us more for Channel E or we’ll cut your viewers off from their favorite programming.  ESPN and other sports channels now represent such a large chunk of cable programming costs that Cable companies are considering creating packages that don’t include sports programming at all!

The second dynamic is that “there is nothing on” one.  Of course that’s not true, but it always seems that way.  My wife and I have a terrible problem finding something we both want to watch.  We both love House and it’s just about always on, but the episodes are all repeats.  Worse, we didn’t watch the first few seasons and we always find the repeats are ones we’ve seen and not the ones we haven’t seen.  Or Starz is about to start a new season of Spartacus, a show I didn’t watch in its original 2010 season.  A friend suggested the series and now I want to watch the old season before the new one starts.  Cable is not good for this, Streaming or Video-On-Demand services are.

Now what are the dynamics holding us, and the world, back from a rapid move away from Cable are extensive.  Of course the Cable companies are fighting the move in various ways (e.g., their own Video-On-Demand services, included in the package, attempt to mimic the benefits of Internet-based services).  And content-providers are conflicted, fearful of angering their primary channel (Cable) by making content too easily available over the Internet and worrying that they won’t be able to make enough in the Internet world compared to the Cable world.  But there are two bigger dynamics at play, the current state of the Internet infrastructure (at least here in the U.S.) and perhaps most importantly Age.

Let’s get the Internet infrastructure out-of-the-way first.  Very few Americans have Internet service capable of providing reliable, high-quality, video streaming.  Most don’t even have it available to them.  And even when they do from a spec standpoint the infrastructure behind it doesn’t have the capacity to support everyone who wants to stream video.  My 10 Mb/s home service usually gets at least 6 Mb/s to my Internet provider but their connection to the rest of the Internet frequently seems to overload so that I’m getting 3 Mb/s or less.  Often during busy periods it might drop to 1-2 Mb/s.  And so a service that in theory should allow for reliable watching of high-definition programming rarely is capable of doing so.  Most Internet video either degrades dramatically in quality for periods of time (with Netflix for example), stalls or even reports the loss of the Internet connection (pretty much all streaming services other than Netflix) during the course of a program.  Even the 25 Mb/s FIOS service at our second home has these problems, though less frequently.  These problems at best degrade the overall viewing experience and at their worst ruin an otherwise well-planned evening.  Until most people can reliably watch streamed media (or quickly download to local storage and then reliably watch) they aren’t going to start dropping their Cable or Satellite service.

But the biggest factor hindering the move away from Cable, and the one that will eventually accelerate it, is the Age of the customer.  Or rather the generational viewing habits.  The remaining members of the “Greatest Generation” are never going to make the switch.  For Baby Boomers, who grew up alongside Cable, our viewing habits are too well ingrained for most to entirely make the switch.  We are going to augment our Cable with these services, and we may even move to reduced content Cable programming packages.  But by and large we like channel surfing and instant gratification too much to give it up.  But the younger you are the less attractive Cable becomes.

We are now 20 years into the DVR revolution and 15 years into DVD revolution.  More realistically we are about 10 years into the general acceptance of both.  When I talk to parents I find that very few allow their children to just turn on the TV and search for something to watch.  Generally they record specific programs on their DVR that they want (or will allow) their children to watch and supplement that with DVD (or more recently Internet-based services) programming.  A simple look at the timeline means that we are just entering the period in which millions of kids who’ve never been hooked on the Cable habit leave the nest and make their own decisions about the entertainment they bring into their home.  Getting their entertainment on-demand over the Internet is going to be the norm.  Cable is going to be a hard sell.

My five slow years followed by a knee in the curve, and then a real decline in Cable in about ten years, is predicated on both improvemenst in Internet infrastructure and the generational shift that is underway.  It is also predicated on content providers “falling into line” and making it easy and cost-effective for consumers to obtain their content on-line.  So for the next few years they’ll offer some resistance to protect Cable and DVD sales, but eventually enough consumers will choose to give up programming unless they can get it over the Internet (without a Cable subscription) that content providers will be forced to treat it as a first class citizen.  There are other things that need to develop as well, such as better ways to create virtual channels and channel guides, and improvements to sampling programming, but those will come along soon enough.  Even ignoring the dozens of other options, a battle supreme is emerging between Microsoft’s Xbox, Google TV, and whatever comes next from Apple towards defining the future “TV” viewing experience.  At least one of them will nail the viewing experience to the degree that most people, even those unwilling to drop Cable, find Internet-based TV truly compelling.

So the bottom line is that 2012 will be another year for early adopters, but for the vast majority of us Cable or Satellite will remain our primary means of bringing entertainment into the home.  Many of us will follow the 2012 Presidential elections on the Internet, but mostly turn on Cable TV to view debates and watch the results roll in.  But in 2016 a significant minority, and perhaps most first-time voters, will use only the Internet to follow the elections and their results.  Because that is the only thing they’ll have.

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7 Responses to Is 2012 the year people break the Cable habit?

  1. Bob says:

    We can probably also expect cable companies that are also ISPs, Time-Warner and AT&T in my town, to fight back by imposing download caps on their internet services. I believe that AT&T has already done so with their Uverse service. I have 1 HD DVR, 1 SD DVR, two remotes, two outlets, the cheapest Digital package, 15Mbs/1Mbs internet service, and the cheapest IP phone. This costs just under $180/month. I’d love to be able to cut that bill in half. The only reason I have the IP phone is that it was $10/month less expensive with it than without it. There is a phone connected only so I can call 911 and they will automatically know my physical location vs. me having to tell them if I call on a cell phone.

    The main reason we don’t do TV over the internet is, other than the local news, the only TV we watch are cable-only shows. If we watched network TV, we’d be interested in something like Hulu, assuming the bandwith issues you mentioned are overcome. The digital music fills another OTA gap, there are no FM radio stations that broadcast jazz/smooth jazz in our town.

    So, we like many people, are held hostage by the cable companies.

    • halberenson says:

      Well, I blame the download caps more on “Net Neutrality” rules than on the conflicts in cable companies’ businesses. If a network operator can’t charge the sender for the data being sent over its network then it has little choice but to make the receiver pay. In other words, they can’t charge Netflix so they have to charge you. Today’s prices are based on each household using the stated bandwidth for very short intervals, not for the hours at a time required by video. And since they probably can’t impose an overall (huge) rate increase across their entire customer base to cover the cost of delivering streaming/downloaded video to a subset they’ll have to attack the problem by creating data caps. Only do email, web surfing, and watch short video clips? You can probably get away with a 5GB/month package. Watch hours of TV and movies over the Internet every night and you may need a 50GB/month package.

      The other option is to alter “Net Neutrality” ideas to make large senders pay for actual bandwidth consumed. Sure Netflix goes from an $8/month offering to a $12/month (or $16/month) offering. But then you pay by the service you actually consume and not by imposition of a data cap. Right now Netflix et al are getting away with murder by not having to pay for the massive network bandwidth they consume. And I think data caps do more to harm the innovation that Net Neutrality tries to protect than allowing telecoms to charge senders for the data they send. I know many more people who can reason over if Netflix is worth $12/month then can reason over the need to go for a larger data cap.

      Now in the long run this dynamic will probably force the Telecom companies to split their Internet and Cable services, but they will fight this as long as possible. And I’m not really sure that as consumers we should push for it to happen more quickly. The Internet business alone isn’t going to be a particularly healthy one (as its a commodity), and so I fear if it were standalone it would stagnate. Recall that the entire point of DSL, for example, was the ability to implement it over existing POTS infrastructure. Cable also took advantage of existing infrastructure to provide Internet services. We aren’t dealing with a separate set of pipes for the Internet vs other services, particularly in the so-called “last mile”.

  2. IT Rush says:

    Hmm, let’s see about this, actually I’m already thinking about it.

  3. We recently cut the cable cord and we’ll go back eventually. The first month of Netflix, Hulu, and Amazon Prime is great but then you run out of things to watch. On Netflix the only easy programs to view are the ones that show up in their menus. Yes, you can search for thousands of shows, but after a day at work and putting the kids to bed, I really don’t want another decision. I’ll cruise through my 20 favorite channels and pick whatever I like most. If I watch the same episode of Man v Food again, I don’t really care.

    Honestly, I don’t want choice. I want to be fed an hour or two of junk and then I’m headed to bed. I don’t want to decide what to watch. I’ve owned the Godfather Triology on DVD for years and years. I’ve NEVER watched it. However, every time Godfather II comes on AMC, I’ll watch it beginning to end.

    We cut the cord because of cost. I was fed up with paying for the worthless channels (90%+) and the worhtless music channels and anything that still comes in standard definition.

    But, now instead of paying for cable, I order the lastest season of Big Bang Theory off Amazon and stream it for $30. Same with the final season of Breaking Bad that I missed. Cutting the cord is actually costing me money.

    The answer to all of this is A LA CARTE pricing. Consumers need to force the cable companies to let us order what we want.

    • halberenson says:

      This is why things are still too early for most people. But there are other ways to meet your needs than ala carte pricing, though I personally agree that is the cable companies’ best bet at beating back the streaming media guys in the short to mid term. Eventually a streaming service will catch on and create solutions for channel surfers, and that will also solve your needs. So ala carte pricing is just another delaying tactic.

      The bundling isn’t the sole fault of the cable companies. If a cable company wants to carry the local NBC affiliate then NBC Universal forces them to take a group of NBC Universal channels as a package. Since they are paying for all the channels the cable company needs to charge you for them, even if you don’t want them all. It isn’t clear to me what packages the cable companies can get from Discovery, but they are sold to the cable companies in packages. This is perhaps the only reason that new and/or less watched channels even exist. If the content provider couldn’t force cable companies to take these channels in order to get the ones really in demand then they wouldn’t create the new channels. The only leverage a cable company has is to refuse the package. But when when the Olympics are coming up, how can the cable company refuse to take NBC Universal’s package? It has to carry the local NBC affiliate or customers are going to flee in droves to a competitor who is offering Olympic coverage. Customers have loyalty to the programming they want, not to the pipes delivering that programming. So one way of thinking about ala carte cable channels is that it will cause many niche channels to go out of business, push programming for those niche audiences to the streaming model, and accelerate the move to replace cable with streaming services!

  4. jesterdev says:

    I cut the cord quite sometime ago and couldn’t be happier. Practically everything I want to watch I can view online for free. I did quite a bit of research beforehand, looked around to see what I wanted and found just about everything, the things I could not find eventually came along. Never had an issue with enough bandwidth, in fact I don’t know anyone who has had issues.

    Either way there are lots of options out there, explore and have fun.

    • halberenson says:

      You must live in an area that has good bandwidth. Many people do not. I have terrible viewing experiences on many services, and certainly can’t get HD from anyone.

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