NPD (National Purchase Diary) Group, Inc. estimates that 16 percent of U.S. households don’t have pay-tv service – meaning 84 percent do. In the first 6 months of 2012, .1 percent of survey respondents dropped cable because they found all the content they wanted online. Digital trend sites such as Gigaom.com call this a huge success for the industry as consumers should be able to see the economic opportunity in cutting the cord and switching to internet broadband services like Netflix and Hulu for their television entertainment.
According to one Forbes.com article, “Time Warner offers Internet and TV service for $50 per month vs. standalone Internet for $45 per month.” This savings of $5 was reported on by The Wall Street Journal too, saying that “cable companies are making the customer an offer they can’t refuse.” This bundling idea, when taken out of context, makes it seem as if cable businesses are doing their best to keep the dwindling flame of cable TV lit as long as possible. The only problem is that the deal that Time Warner offers is only for new customers and doesn’t last; rates go up after the beginning trial period.
Today my household pays $120 per month for a Comcast cable package, consisting of high-speed internet, on-demand HD cable, and no premium channels. We pay not to worry about buffering and slow internet while watching our favorite shows. All the while, we know that Century Link offers internet (a little slower than Comcast but not too bad) for only $20 per month for 5 years. After that, your bill goes up to $35 per month.
Despite a major shift towards “free” digital consumerism, the price for reliable (and legal) viewership is still quiet high. Just because people have the ability to take advantage of cheap entertainment, doesn’t mean they are willing to settle for its shortcomings. Service providers have always been able to charge more for high quality products and my belief is that the internet still hasn’t compromised that for the television industry.
What is your take on television via the internet? Do you think that it threatens the classic cable television model? We appreciate your feedback. Leave a comment below.
-Lee Sumner, Research Analyst