Mr. Chear’s News Blog

Cord-Cutting: The Real Story Behind the Myth

Is free TV really better than cable TV, and even satellite TV? Here’s a report that explains the differences and explodes the myth. It's an appealing idea to ditch your cable TV provider for much cheaper alternatives. Since there are now a host of such plans, there has been much talk of "cord cutting," or the symbolic severing of that cable in favor of alternatives. Conventional wisdom has it that customers who ditch cable replace it with video streaming services like Netflix (NFLX) or Hulu Plus. Surprisingly, however, that's not necessarily where the lost subscribers end up. Staying Tuned Contrary to popular opinion, the wider pay-TV universe isn't really losing much business to the Netflixes and Hulus of the world. According to data compiled by Leichtman Research Group, the top 13 pay-TV purveyors in this country -- including cable, satellite TV and telecom companies -- saw a net loss of approximately 125,000 video subscribers in 2014. At first glance, 125,000 is a big number. But the surveyed companies collectively broadcast their product to over 95 million customers. So the net loss was barely over 0.1 percent of the total. So the overall migration away from traditional pay-TV services is fairly limited. See You Later, Cable However, the picture shifts when we look just at cable companies. They're shedding subscribers in notable numbers (nearly 1.2 million net in 2014, leaving a total of just over 49 million). Meanwhile the TV service bundles provided by telecom incumbents AT&T (T) and Verizon (VZ) added them at a rapid clip, according to Leichtman. All told, the two companies took on just over 1 million new subscribers last year, padding their combined total to almost 11.6 million. Meanwhile, satellite TV companies DirecTV and Dish added a combined 20,000 subscribers last year. Cable customers are ripe for the poaching, not least because the cost of such services keeps rising. That isn't necessarily because the cable companies are getting greedy, however. Retransmission fees -- effectively, the cost of content from popular cable channels like AMC Networks' (AMCX) flagship AMC or Disney's (DIS) king of sports, ESPN -- have been increasing significantly over the past few years. Those expenditures are being passed along to end users, at least according to the cable providers. But a rapid upward climb in costs isn't the only problem. After all, the satellite services have to cope with it, too. Compounding the issue for cable is its abysmal record in customer satisfaction, the rates of which are stubbornly low. A recent article in The Washington Post revealed that 53 percent of surveyed cable subscribers would abandon their service if they had a viable alternative. Hard to Say Goodbye That's a big "if." One major reason that the adoption of phone company and streaming services hasn't been higher is that switching from cable to either is not particularly easy to do. The telecom offerings -- AT&T's U-Verse and Verizon's FiOS -- are run on fiber- optic cable networks. Compared to traditional cable, this technology is younger and less built-out. Fiber services are available in far fewer markets, typically metropolitan areas of selected cities. Read More

Dish Breaks Some Dishes in Creating Sling TV

Dish Network CEO Joe Clayton introduced Sling TV in January, and it went live in February. The biggest disruptor of the pay-TV industry may very well be one of the leading pay-TV providers being disrupted. Dish Network (DISH) rolled out Sling TV nationwide on Feb. 9, giving video buffs tiring of inflating cable bills a way out. The online service offers live streams of several leading cable networks, including sports channels, for just $20 a month. The base package includes ESPN, ESPN2, TNT, TBS, Food Network, HGTV, Travel Channel, Adult Swim, Cartoon Network, Disney Channel, ABC Family, CNN, El Rey and Galavision. AMC Networks (AMCX) will be added to the basic plan soon. The $5 add-ons include kids (Disney Junior, Disney XD, Boomerang, Baby TV and Duck TV) and news (HLN, Cooking Channel, DIY and Bloomberg TV), with sports coming soon (SEC Network, ESPNU, ESPNEWS, ESPN Buzzer Beater, ESPN Goal Line, ESPN Bases Loaded, Univision Deportes, Universal Sports and beIN Sports). Sling International TV covers Arabic, Bangla, Brazilian, Cantonese, Filipino, Gujarati, Hindi, Malayalam, Mandarin, Punjabi, Taiwanese, Tamil, Telugu, Urdu and Vietnamese. The Unlikely Revolutionary It would seem that Dish has more to lose than gain with Sling TV. It has 14 million subscribers, and the average revenue per user during the third quarter clocked in at a whopping $84.39 a month. That's a lot less than the $117.30-a- month average that satellite rival DirecTV (DTV), and Dish doesn't have as many pay-TV subscribers as cable giant Comcast (CMCSK). Sling TV obviously doesn't offer the entire gamut of channels available through Dish, but is there enough there to get folks to settle for paying less than a quarter of what they're paying now. Thankfully for Dish, most of the subscribers will likely come from the ranks of DirecTV and Comcast subscribers. They are larger. They are, on average, more expensive. Read More
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