Sunday, April 17, 2011

Ditching the box?

Lately, several of our friends have started considering disconnecting their cable/satellite services. A couple have actually pulled the plug.

Their reasoning up-front seems sound: they want to save money. They say they can stream all the network TV content they want and, for any shows they cannot catch online, they can get on DVD (or streaming) through a service such as Netflix.

I'm not so sure this plan works out in the long term for them.

I can say for sure my wife and I are considering ways we can cut our bill down. Perhaps cutting the Starz/Encore package? But a moment of truth: I watch way too much sports. A friend of mine admits he's "going to likely be spending more time in bars this fall" to catch his college football.

For what it's worth, I have definitely spent the equivalent of a cable bill in a bar tab for a sporting event. And when you consider my lovely wife seems to have grown quite fond of the Yankees and Sounders - and since sports is best watched live - this is a challenge.

Most of the friends we have considering cutting the cord aren't as big sports fans. So, in theory, this is a brilliant move for them. Grab the laptop, hook it up to the HDTV there and voila... all the TV. Free, what for Netflix prices and the cost of internet service.

And there, friends, is where I see the problem. A quick aside...

Twice while I lived in NYC (9/11 and the 2003 blackout), cell phones were useless. A great article in the NY Times afterward explained that, normally, 20% of NYC cell phone owners were making a call. During those two events, 80% were trying to make calls. The infrastructure of the system couldn't handle the load.

We take for granted that things like cell phones work like clockwork. We forget it's still "new" technology and we're still building the capacity for wireless phones in this country.

Well, high speed internet is the same way. We're already seeing cell phone companies phasing in plans to build in tiered billing plans for data use because 10% of users use 90% of the data pipeline.

While we're all used to streaming content, I'm willing to bet that if too many people who use your ISP (Comcast, Time Warner or whoever) start streaming HD content to their TVs all night long, we're going to see slower connections and, at worst, a need to rapidly build new infrastructure to support that use.

Data lines do not build themselves. There are costs for materials, labor and maintenance. And the needs only increase as technology becomes more advanced.

Bottom line: if we all ditch "traditional" TV delivery for internet-based methods, our internet bills are going to skyrocket. My $39.99/month would likely equal my DirecTV bill in time. So, I'm not sure where the savings is over time. And I still wouldn't be able to watch Sounders road games... unless I pay $49.95 for access online.

I do think we are going to come to a moment where TV is offered a la carte... you pick your channels from a menu of prices and set your own monthly bill. To get there, many cable network execs are going to have to lose their jobs, though. I mean, given a choice, do you really want Tru TV? There are countless money-losing cable nets sustained only because they are included in basic packages.

But from a capitalist standpoint, the folks who provide the service aren't going to install better internet infrastructure as a favor to us. They want to make money. They have to recoup their investment.

So before you pull the plug for short term benefit, consider the longer term economics of the industry and how it affects end users.


Bill Lysse said...

Actually..........b/c of the new NCAA Tournament deal, TruTV is a must for any sports fan that wants to watch all the games every March, unless you want to watch them online. I agree w/ everything you are saying. In the long run it is still cheaper to just go with DirecTV or Verizon FIOS.

jennyklane said...
This comment has been removed by the author.
Spragg said...

Do what we did - ditch cable and satellite altogether and just get a PS3 or Xbox that you can get Netflix (and soon Hulu I think) through. It's awesome.

Jay said...

Bill - Point taken on Tru, though I would say there are at least 1009 examples of a channel many would opt out of.

Spragg - No sports on game consoles. Sadness.

mariannem said...

I agree with most of this, but just like I don't think that a few people doing no-buys is responsible for yarn stores closing I don't think that people should feel like they have to get content in a certain way. I know that you're right right that prices will go up long term, but that doesn't actually mean I want to pay $100 a month for a billion channels right now. I guess I see the economics following my consumer choices (and probably, admittedly, in ways that are expensive for exactly the infrastructure reasons you outline), not that my consumer choices should necessarily be made to try to keep a particular economic model in place. So I agree that prices will go up but I disagree that that means consumers should just keep doing what they're doing if they don't need the current model.

That said, I also agree that for sports directv or cable is pretty necessary, so obviously your calculations as a sports fan are different than mine, since I rarely watch sports.

I'd rather pay for choice (as in an al la carte system, which is essentially what I've built for myself (HD antenna + Hulu + Netflix, in a limited and kind of annoyingly hybrid way) than pay for a bunch of stuff I don't want.

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