Seeking Alpha

The Pay-TV industry: Something has to give

  • The economic argument is lopsided against the Pay-TV industry (CHTR, CVC, TWC, DISH, DTV) moving to an a la carte system, reasons Needham.
  • The investment firm has some staggering estimates which indicate consumers could end up paying significantly more for an unbundled system or see a large number of networks close up shop to limit their choices.
  • Working backwards, 180 channels at an average annual programming cost of $280M per year requires a bundled system to create the ad and subscriber revenue to support it.
  • Though the math might work out fine and dandy, subscriber losses and a younger generation unfazed by cord-cutting indicates something might need to give.
  • The wildcard in the mix: Online TV initiatives from Sony, Google, and Intel as well as the evolution of Netflix (NFLX) will also play a factor.
  • Related stocks: CBS, DIS, AMCX, TWX, CMCSA, FOXA, SNI, MSG, DISCA
Comments (14)
  • Esekla
    , contributor
    Comments (2035) | Send Message
     
    A large number of networks closing up shop seems just fine and dandy to me. What's truly staggering is the purity of much of the junk that gets broadcast. The real takeaway here is that analysts, and more importantly, networks have very little idea what customers really want to watch. Yet somehow, the powers that be have managed to force a system where people pay for all of it regardless.
    4 Dec 2013, 05:35 PM Reply Like
  • Drew Robertson
    , contributor
    Comments (308) | Send Message
     
    One thing is clear. Consumers are delighted to pay DIS for ESPN channels even though they don't watch them. Furthermore they look forward to ever increasing retrans fees from CBS, DIS, CMSA and their local TV channels. They know they've been getting a bargain up until now and are concerned that they may be starving the Golden Goose. Thus their enthusiasm for higher fees.

     

    Thankyou.
    4 Dec 2013, 05:54 PM Reply Like
  • StepUp
    , contributor
    Comments (420) | Send Message
     
    "Yet somehow, the powers that be have managed to force a system where people pay for all of it regardless."

     

    Want to know how? I highly recommend the NPR Planet Money podcast episode #488 "The Secret History of your Cable Bill".
    4 Dec 2013, 11:53 PM Reply Like
  • mrbubble597
    , contributor
    Comments (15) | Send Message
     
    Cutting the cord at the end of this month. My hope is to see much more sports programming made available via streaming so I can keep up with my college football. I'm no longer willing to pay upwards of $100/mo for just a few channels we like.
    4 Dec 2013, 08:00 PM Reply Like
  • Duce1024
    , contributor
    Comment (1) | Send Message
     
    Cut our cord at the end of Sept....best decision we have made in a while. Haven't missed a show with on-line streaming. Kids have discovered a world beyond the living room and.....wait for it.....are starting to form their own opinions based on their experiences and not some talking head's opinion.
    5 Dec 2013, 05:13 AM Reply Like
  • positivethoughts
    , contributor
    Comments (1760) | Send Message
     
    Today's cable companies are the typewriter manufacturers of the late 80s. They will have the same fate as has occured with AOL. I am still shocked that AOL earns any revenue.
    4 Dec 2013, 08:02 PM Reply Like
  • hhess13892
    , contributor
    Comments (221) | Send Message
     
    AOL completed its acquisition of Adap.tv back in August and it's PPS has done quite well since.
    4 Dec 2013, 09:15 PM Reply Like
  • User 18728181
    , contributor
    Comment (1) | Send Message
     
    I agree completely. If all the miscellaneous networks serving a very small audience is driving up my monthly TWC bill, I'm all in favor of unbundling so I can pay for just want I want.

     

    -SB
    4 Dec 2013, 08:08 PM Reply Like
  • Sakelaris
    , contributor
    Comments (1177) | Send Message
     
    It is always entertaining when the cable spokespersons try to make it sound like they are looking out for us. Phooey on them!

     

    What you need: Netflix streaming, Netflix DVDs, a Roku player, an individual sports stream if you want it, and an antenna for over the air broadcasts. Oh, and you will need to have a convenient bank to deposit all the money you will be saving.
    4 Dec 2013, 09:43 PM Reply Like
  • Aceinmysleeve
    , contributor
    Comments (171) | Send Message
     
    I think people need to take their consumer hats off for a second and figure out exactly what is being said here.
    4 Dec 2013, 10:51 PM Reply Like
  • Randal James
    , contributor
    Comments (2158) | Send Message
     
    Ace

     

    The set-top box provided by your cable company can accept or deny every available channel and they know exactly which they will allow. Direct TV wants to give me the "Nation's Finest" (I made this up, but it is not untypical). It is 325 channels. 20 or so are dedicated public info channels so I can watch every local city council meeting. 80 more are music channels I never listen to. 15 are Nocho Moviales - which is not correct Spanish and I'm happy it is available. Why it is on my TV is a complete mystery to me. If this was ala carte, my friends could be watching it or programs in Hindi and/or Cantonese.

     

    I don't use the shopping networks which are essentially something that is a continuous loop of advertising. These count as stations I'm happy to have?

     

    Of the rest, many are the national networks and we count them twice because they are also in hi-def. So how many channels do I actually use? Less than 20. I didn't include the movie channels as those are generally already ala carte.

     

    ESPN is often cited as the reason why we should never think of ala carte because - Oh Lordy, it would cost $40 all by itself. If that was true, then all the other ABC Programming and A & E must be free. Does that sound right or should I have a choice?

     

    I realize it is passe to speak of magazine subscriptions these days, but if you wanted the New Yorker, would you take it for $18 a year if it also meant you had to spend $12 each for Cosmo, Better Homes and Gardens, Barbecuing with Bobby, Lisbon Travel and Soccer SA? Each would have declining and ultimately no relevance.

     

    I say let the networks and the providers sort out the fees among themselves and then let the consumers choose. I have a sneaking suspicion among our hundreds of options that I'm paying for stuff hardly anyone needs or uses and that is a waste of everyone's time and effort. If someone loves those music channels, please get Sirius Home.
    5 Dec 2013, 04:04 AM Reply Like
  • Aceinmysleeve
    , contributor
    Comments (171) | Send Message
     
    You didn't take your consumer hat off, you pulled it down.
    5 Dec 2013, 04:21 PM Reply Like
  • Randal James
    , contributor
    Comments (2158) | Send Message
     
    Ace,

     

    If the problem is that the channels I watch most and would want to pay for are likely the expensive ones, does it follow that by adding more unloved stations to my list will reduce my cost? If that was true, why not just give everyone all the available channels all the time and the cost should be about $20/month - just like it was when I used to wonder if people would actually pay for television.

     

    Many businesses operate under the archaic theory that you should give the customer what they want. Cable TV has a better plan? For whom?
    5 Dec 2013, 04:36 PM Reply Like
  • 487371
    , contributor
    Comments (8) | Send Message
     
    agree with all of the above: Has anyone tried over-air HD broadcasts?
    All the networks available, with better picture and sound quality than cable or DISH or Fibre-optic, and all free! And time to read books, too.
    Must be up to "700 channels and nothing to watch" by this time!
    5 Dec 2013, 08:52 AM Reply Like
DJIA (DIA) S&P 500 (SPY)