Cable meltdown

melting_cableWe’ve written previously in these pages about the inevitable demise of cable TV, but the pace at which this is happening appears to be accelerating.

One can only imagine the fear and loathing of cable executives as they watch their business model melt down.

Previously, we imagined a three- to five-year period in which cable subscriptions would decline to the point where the business would no longer be sustainable.

However, recent developments make it look more like a one- to two-year window. There’s blood in the water, as prominent content providers move to alternative revenue streams.

Could it be—gasp—that consumers are finally going to get what we’ve been asking for—a la carte programming? More options for quality streaming content are appearing, and the tipping point for the cable industry may be at hand.

Enabling cord cutters

Cable subscriptions have been dropping for years, as consumers increasingly have been speaking with their wallets. Since the first quarter of 2012, cable subscriptions have declined an average of three percent—approximately 180,000 subscribers—per quarter.cut-the-cord

It’s not a coincidence that the popularity of programming alternatives such as Netflix, Amazon, and Hulu Plus began to rise around that same time.

While these providers don’t typically offer the latest and greatest movies and television series, their listings are improving steadily, and now also include some quality original programming.

Match that with reasonable subscription fees, and these services become truly viable alternatives.

As HBO goes…

One of the channels that has kept me tied to cable is HBO. The exceptional programming that has emerged over the years from HBO is unsurpassed—The Sopranos, Deadwood, Game of Thrones—the list goes on.

hbo-go-iconA few years ago, HBO released an application called HBO GO. Virtually, all past and present HBO programming could be streamed onto your mobile device, tablet, laptop, or set-top box. The wrinkle was that you needed to have a cable subscription that included HBO.

Nonetheless, the infrastructure to go solo with HBO GO was put in place. HBO merely had to decide when it was beneficial for them to launch the service to all comers for a monthly fee. That time apparently is 2015.

In October, the company announced it would be offering a monthly subscription service sometime in 2015. HBO has not announced exactly when the service will debut, nor the monthly cost, although rumors suggest the price will be around $15.

Make no mistake, this is a big step for potential cord cutters, as many content providers in the industry are likely to follow HBO’s lead.

CBS joins the fray

CBS-Logo-e1331750370386Speaking of which, a day after the HBO news, on October 16, CBS announced its own streaming service. Reportedly dubbed “CBS All Access,” the service is available now for $5.99 a month.

Along with the other major U.S. networks, CBS gains a lot of its revenue, some $2 billion per year, from the cable industry. Clearly, however, the network sees a huge untapped market in consumers who have cut the cord or never signed up for a cable subscription in the first place.

Showtime tags along

CBS also happens to own Showtime, the premium channel that competes directly with HBO. Following HBO’s lead, Showtime will also offer its own streaming service in 2015, although details are sketchy at this time.SHOWTIME-logo

Although not in the same league as HBO, Showtime has developed some seriously good programming, including Homeland, Dexter, Nurse Jackie, and the United States of Tara.

Will Showtime’s entry in the streaming market be another nail in cable’s coffin? Stay tuned.

Missing link

The popularity of televised sports in the U.S. is perhaps the biggest reason why people continue to pay for cable. Professional sports, even college sports, are big business, and there continue to be a myriad of obstacles to streaming live sporting events.bb_on_tv

Although there are streaming services such as NFL Game Access, NHL Game Center Live, NBA League Pass, and MLB.TV, they are costly and subject to local blackouts.

If you’re determined to cut the cord, however, you’ll have to get creative. You could always watch the big game at your local tavern, or with a friend who does have cable. You could even arrange to share the expense of a cable subscription with that friend—or at least agree to bring the nachos and beer.

Crunching the numbers

Right now, my monthly bill is about $170 including TV, Internet, and phone. That is a “package rate” that would be higher, according to my cable provider, if I were to buy the services separately.calculator

Let’s say I were to cancel the TV part of my subscription. In so doing, I would also probably cancel the phone, since both my wife and I have cell phones and get almost all of our calls on those devices.

That would leave Internet. Right now, the cable bill shows that my Internet charge is $59.99 a month plus taxes and fees. So let’s say it’s $65 with the package cost. Without the package cost, let’s say it’s $70 a month.

So here’s the monthly breakdown were I to cut the cord while still getting most of what I want to watch through streaming services:

Internet: $70
Hulu Plus: $7.99
Netflix: $7.99
HBO: $15
Showtime: $15
Amazon Prime: $7.99
Grand Total: $123.97

That would be a monthly savings of $46, or $552 a year. Not life changing, but certainly something to consider. If I wanted to be even more frugal, I could opt out of Showtime, saving me another $180 a year. That’s $732 a year.

The rub

While the economics of cord cutting are tempting and the alternatives are growing, there is another consideration. Over the last several quarters, cable providers such as Comcast are reporting increased Internet revenues.

internet_costsCable companies, well aware of their declining subscription revenues, are upping the rates for their Internet service.

It appears that we may be damned if we do, or damned if we don’t. But I suspect the full picture hasn’t been painted just yet. Consumers increasingly are reluctant to pay the exorbitant costs exacted by the cable industry.

Even more telling, members of the millennial generation are opting not to even sign up for cable, getting their entertainment and news on their smartphones and cellular-enabled tablets.

This could be the statistic that most keeps those cable executives up late at night.

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