There's a really interesting discussion to be had about the future of delivering video to the home. Which technology makes the most sense? How will content companies make money in the future? How do we best address digital rights issues? Instead, I usually read some "kill your cable" rhetoric. So, that's why I return to the topic of cord-cutting: Because everybody else keeps writing about it, often in an oddly hostile fashion. CNET’s Marguerite Reardon started off an Ask Maggie column on cord-cutting this way:
If you are like me, you cringe every month when you pay your cable bill. And you dream of the day you can cut your cable cord and stop paying that monthly bill. It’s not that I don’t like to watch TV. I do. But I can’t stand that I pay $140 a month to watch a handful of shows on five or six channels.
First, that $140 probably covers more than just standard programming . I pay about $180 a month to Comcast, which includes video, Internet and phone, including HD, a DVR, premium channels, and so on. When a reader writes in how to watch video online, Reardon answers, “Good for you for cutting the cable cord!” There are certainly people who choose not to subscribe to multichannel video services. Nothing wrong with that. But if you want to watch the programming – cable’s original shows, news, sports – then that’s how you get it. Aaron Barnhart of TV Barn helpfully points out that, for all the complaining, people are continuing to subscribe to multichannel video service in growing numbers. But, counterintuitively, Reardon love to recommend that people unhappy with cable service should turn to cord-cutting – which doesn’t allow you to access all you can get from cable programming. It would probably be along the lines of suggesting that people unhappy with cable should try reading a book. Did you know that libraries loan them out for free?
Replacement v. Substitution
This is a critical point: Cord-cutting is not a replacement, it’s a substitution. What do I mean by this? If you subscribed to cable to get access to over-the-air broadcast channels – like NBC, CBS, ABC, FOX – and then canceled your service and instead used an antenna to get that programming, that is a replacement. You get the same content through alternative means. But if you have cable to watch cable shows, as most people do, and then cancel cable, turning instead to the Internet to watch non-cable content on YouTube and Hulu, it means you substituted one kind of content for another. There’s certainly some cable programming you can watch for free online, but there’s lots you can’t. As I already noted, people continue to subscribe to cable in relatively stable numbers (as we’ve covered before) and they watch TV a lot (Nielsen reports 158:25 monthly hours, as opposed to “a handful of shows.”). Recent data shows that “for the most part online-video viewing continues to be a work-time distraction,” with the 4:00 – 5:00 p.m. slot showing more video streams than any other daypart. And it’s probably worth noting NewTeeVee’s post on the study from online video search site Clicker, which showed that even though 90% of broadcast content is put online, it’s typically removed in six weeks or less. Meanwhile, some think the current system is a conspiracy, and they find the new “TV Everywhere” service to be a conspiracy designed to stave off cord-cutting and the inevitable migration of all content to the Internet for free or for some minimal price.
The Salvation of Over-the-Top Video
What about competitive services like Netflix? Their latest Q2 reveals that they’re increasingly about streaming, so why aren’t they a threat? Well, as they continue to build their business, access to exclusive content gains in importance. That’s the importance of their deal with Relativity or their deal with Warner Bros. At some point, getting access to content, especially very popular content, gets expensive. Suppose that’s the Netflix model: They deliver video directly to your television; you pay a monthly subscription fee and get to watch as much as you want. In order to offer you the content you want, Netflix then has to make further deals with studios, eventually ponying up real money in order to get the content. In order to recoup those costs, they may eventually have to increase their subscription fee. Is that a substitution or a replacement?
UPDATES: NewTeeVee hits exactly on my point: The Real Cost of Netflix Streaming is the Movie, Not the Bandwidth. Key quote: "...the real cost of running its streaming business is in acquiring the content, not delivering it." In addition, I linked to an article in my post that I felt exemplified the notion that online could provide a substitute for cable. I received a message that the author of that piece felt I had made an unfair comparison; I have removed that link.