Somewhat suddenly, the world is realising that the TV market as presently constructed may be in trouble.
The stocks of major media companies are getting hammered this year as investors discover that people are dumping cable subscriptions.
The stocks really got wiped out in early August when Disney revealed during its earnings that ESPN subscriptions had fallen. ESPN contributes roughly half of Disney’s operating income. It gets $US6 per subscriber. If that revenue stream dries up, Disney is in trouble.
Right when all of this was happening, my two-year contract with Verizon FiOS was ending. I have a new baby, so I’m not watching much TV in my free time. I was paying $US154 after taxes for TV and Internet, and wanted to cut back on my bill. (I had a top of the line package — DVR, all the sports channels, HBO, etc.)
For the most part, when I do watch TV, it’s either Netflix, Amazon, HBO, or the odd sports event on ESPN or broadcast channels.
Netflix costs $US8 a month. Amazon is bundled in with Prime, but we use Prime for ordering stuff, so the TV is essentially free. I have a demo account for Sling TV, a service that streams live TV over the internet and gives me a “skinny” bundle of channels, including HBO. Sling without HBO is $US20 per month. I also have an antenna from Mohu to grab local broadcast channels. (The antenna is a bit wonky, but I could get it to work well-enough for my needs.)
I figure that’s more than enough TV for my needs.
I looked at Verizon’s FiOS site and saw that internet was available for $US45 pre-tax. I figured that would be good enough for me. I could get my TV through the aforementioned channels.
And so, I was prepared to cut the cord.
But then, a twist.
When I tried to get the $US45 internet package, Verizon told me I was ineligible since I was coming off a two-year deal for TV. The $US45 price is only available for new customers.
If I wanted just internet, it was going to be $US80 a month.
If I went with the $US80 internet package, it would mean that I would be paying ~$US110 for my TV needs. ($US80 internet + $US8 for Netflix + $US20 for Sling.)
While that’s better than $US154 (after taxes) it’s not exactly a steal.
Plus, Verizon offered me two “channel packs” for $US10 a month which would be a better deal than Sling. It would also be better experience as a user. One of the biggest problems with cutting the cord is that you end up with a pile of disjointed apps and services that require you to hop around to find shows. Pay TV, for all its issues, is a pretty elegant solution compared to its internet-based competition.
Luckily, I live in an area where I can get Comcast and FiOS. Comcast offers an internet package that includes local TV stations for $US44 per month. Of course, there’s a catch. (There’s always a catch with these companies.) The first year is $US44, the second year is $US64.
I used the Comcast deal as leverage to get Verizon to offer me internet plus local TV (thus negating the need for an antenna) on a month-to-month contract for $US60 per month. It’s not a better deal than Comcast, but the internet speed was twice as fast on Verizon as it was on Comcast. (50 megabits per second from FiOS versus 25 megabits per second.) And I didn’t have to lock myself into a contract, which is nice.
So, what’s the point of all of this?
Well, this is a long way of saying that dumping pay TV is not as cost-effective, or simple as one would hope. And, going “over the top” with internet-only services feels more like a political statement than anything else. It’s not going to create a better experience. And the total cost of services like Sling TV, HBO Now, and Netflix add up to a cost comparable to what traditional pay-TV companies offer.
That’s not to say investors are wrong to be worried. New consumers are going to be more selective about what they subscribe to. And channels are getting carved up, allowing consumers to bail on channels they don’t care about. And, I did managed to cut my bill in half by dumping my premium FiOS plan for the most basic offering available.
But, we’re still a long way from the TV industry getting totally creamed by the internet like the newspaper, or music, industries.
If you like watching TV, there’s still nothing better than paying for traditional pay TV services.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.