In the Chicago area, basic cable Comcast TV service, which displays about 12 channels combined with cable Internet, costs around $67 a month. A portion of this amount, around $12, is spent on taxes. During a year, a subscriber will pay about $800 a year for this bare bones service. Stepping up to an entry level Comcast entertainment package adds about another $600 a year to that service, tipping the scales at a hefty $1400 a year for “TV” and internet.
Content providers quote their prices at introductory levels of $29.99 a month, because paying $120 a month for service is rather expensive. Probably more frustrating than the cost is no matter what service package you choose or what you pay, the consumer cannot pick the individual channels they wish to see – the channels are bundled.
Cable companies have dictated to consumers what programs are provided to the viewer since the first coaxial cable was tightened to the back of a TV. That means if a senior couple signs onto a basic cable package, they will be forced to take MTV as a channel. A thirteen-year old will be forced to take the CSPAN. From a business standpoint, cable services bundle channels together to claim more viewership, but what does it matter to an advertiser if the viewer numbers are large but the demographics are watered down.
After years of continuous growth, cable viewer numbers are on the decline and television content providers are fighting with each other for the costs of viewing rights. In the third quarter of 2010, cable and satellite services lost over 120,000 viewers! Based on this rate, it’s reasonable to think that these providers could stand to lose a total of a half million viewers over a years’ time. Last year during the height of the NHL hock play-offs, Versus (a cable channel) and a noted satellite provider, fought over licensing rights to hockey games, furthering viewers dissatisfaction with TV content delivery services. Even with the exodus of viewers’ and the fighting over licensing, it appears TV content providers still “don’t get it.”
Many will argue that the downturn in the economy is causing the migration away from TV and they are correct in a sense. In all purchases there is always a value for cost of purchase delivered. If there is enough perceived value people will pay more for a product or service. Toyota, Honda, and Apple are companies that still command higher prices for their products based on the value they provide. Very simply, people no longer see value in cable or satellite services. Additionally, viewers are not interested in the majority of TV programs they are being forced to take in predetermined packages. Time Warner is now considering a lower cost entry level cable package, but from indications, a choice of individual program / channel selection is nowhere to be found. So grandma and grandpa will still get MTV and Nickelodeon.
Recent announcements from Apple and Google have caught the attention of the major content providers. Apple confirmed that it sold 1 million AppleTV units that allow viewers the ability to watch TV via an internet feed ($99 a box). Both of these industry pioneers realize TV as we now know it will undergo radical changes in the next 5 years. Content providers such as Comcast, ATT and Time Warner are still fighting to hold onto the dying business model that has earned them billions of dollars, but the writing is on the wall. As of this article’s writing, Comcast had received tentative approval for a Comcast / NBC deal that would link the content provider and content delivery service together. Time will tell if the merger will benefit consumers, but based on Comcast’s past record, don’t hold your breath.
Internet-delivered content is coming and people will be able to choose what they want to watch and when they want to watch it without having to support programs or channels they don’t want to watch. Netflix provides an $8 a month service is a great deal for viewers. Hulu offers a great free service and an even better $7.99 a month service. Being able to pick and chose what you want in entertainment is a novel concept, but one proven already by the online music business model. Give the people what they want, when they want it. This is a far cry from content providers who want to bundle phone, television and cable service in one neat package and force the consumer.
The change is coming quickly. People are becoming much more knowledgeable about their options. Also, you can expect narrowly defined networks that reach motivated target audiences, similar to the demographic targeting that took place with topic specialized magazines about 15 years ago. Advertisers will be able to reach a very concentrated target audience by using these networks. There will be new players in the entertainment business and hopefully an opportunity to choose your content instead of being forced to watch a Lady GaGa video with her in a meat dress.