Cord-Cutters Get More Options in Pay TV
However seductive cutting the cord sounds to many cable and satellite subscribers, it hasn't really seemed possible for anyone still interested in watching live TV. But a surprising number of networks are now available in low-profile packages that don't require cable or satellite subscriptions, with more likely to follow.
Just last week a startup called RadixTV started offering financial professionals a package of news channels including CNBC, MSNBC and Bloomberg TV for $14.99 a month.
Another company, Sky Angel, offers a package pitched at religious viewers, including Hallmark Channel, Fox News, Sprout and NFL Network, also for $14.99 a month. And Echostar's Dish Network appears to be dipping a toe in the water, offering non-subscribers a package of foreign channels over the web -- no satellite dish required.
It's adding up to the thin edge of a wedge that might reshape the way consumers pay for TV. "Over the next few years there will be more and more services that compete with traditional cable and satellite companies," said Bernard Gershon, former head of digital distribution at The Walt Disney Company.
"The guys that own the content now have more leverage than ever before because there are many choices for distribution and it's a lot less expensive," said Chris Wagner, exec VP and co-founder of Neulion, a technology firm that enables over-the-web video.
Alternatives to cable and satellite have been dominated so far by video-on-demand services, such as Netflix, Hulu, Amazon Prime and Apple. But new players offering live TV could become much more disruptive.
To undermine the appeal of such services, cable and satellite providers are increasingly letting their existing subscribers watch over the web and on net-connected devices like the Xbox and iPad -- the strategy known in the industry as "TV Everywhere."
Cable operators can count themselves lucky that even if the traditional video package is threatened, their broadband internet services remain central to the alternatives. "You cannot distribute the amount of content people want through wireless," said Peter Stern, head of strategy at Time Warner Cable, on TechCrunch TV. "You need a pipe into the home."
Both cable and satellite providers also enjoy direct relationships with consumers, something that TV networks have never had and upstarts haven't gained yet.
The networks are starting to build their own inroads to viewers, however, through their TV Everywhere schemes. HBO is learning about viewers, for example, through its HBO Go service. ESPN and Big Ten Network are also directly authenticating subscribers. "Cable owns the subscriber but not the content," said Neulion's Mr. Wagner. "The guys making all that content have never had a direct relationship with the viewer. But that world is changing fast."
TV networks do have some interest in maintaining the status quo, in the form of the billions of dollars in subscriber fees that they get every year from cable and satellite distributors. Mr. Stern estimated cable operators pay TV networks an average of $30 per user per month. Compare that with what Netflix pays: an average of $3.
But TV networks also like the idea of more customers for their content. CBS has resisted Hulu to date, but it just sold video-on-demand rights to prior seasons of CW programming to Netflix in a multi-year pact that some analysts estimated to be worth close to $1 billion over the life of the deal.
For live TV, networks want to be paid two ways: through subscriber fees and through ad revenue. Right now cable and satellite distributors are still giving the networks their best deal. But a new breed of well-funded newcomers are making the rounds, with implications not far over the horizon.