story by Kim Souza
ksouza@thecitywire.com
Cable is not a utility bill but in the average household but about $120 is forked over each month for a plethora of channels that are getting watched less and less, according to Nielsen Ratings. The market firm also reports the average cable television household clicks on just 17 of the 189 channels it receives.
Analysts said it’s no surprise so few channels are watched because the bundling tactics used by cable providers force consumers to purchase channels they don’t want to get the ones they do.
PULLING THE PLUG
Some consumers who spoke with The City Wire have found the television programming costs have reached a tipping point in their households and they are finding other alternatives.
Julie Cox and husband Chris subscribe to the Dish Network, but they usually only watch the local channels, which is why they want to drop the Dish.
John Smith of Elkins opted to subscribe to NetFlix and forego the cable or dish options. Kurt Voigt of Fayetteville said his household is saving $100 per month since subscribing to NetFlix with an HD antenna.
Brandy Arena, a second year law school student, said she uses NetFlix and Hulu instead of cable, which is also good enough for Jason Smith and his Springdale household.
The average U.S. household spends between $120 and $148 per month for wireless cell service, according to Ars Technica. The combined cable and cell phone bills total about $5,000 per year amid stagnant wage growth and inflation in food and fuel.
These consumers agreed that pulling the cable programming plug made sense for them given they weren’t watching the majority of the channels and there are more efficient internet based options available.
CONSOLIDATION PLAYS
This migration to Internet-based programming is helping fuel consolidation in the cable programming universe and likely why AT&T is reinforcing its arsenal with the $48.5 billion offer to acquire DirecTV.
The $95-a-share merger will affect about 25 million combined subscribers to the companies’ services, closing in on one-quarter of the households in the U.S. This deal has yet to past the antitrust scrutiny. The U.S. Senate and House Judiciary Committees’ antitrust panels held hearings Tuesday (June 24) to examine the proposed deal between AT&T and DirecTV.
AT&T has said the plan to acquire DirecTV is part of its game plan to offer consumers access to video in variety of media and to grow scale more on par with larger cable competitors. Earlier this month AT&T released comments about the merger with DirecTV, saying the deal will allow competition in the cable market to flourish, taking aim at the Comcast and Time Warner Cable another $42 billion deal in the making.
COMPETITIVE SPACE
A recent report from Nielsen indicates that television homes and the potential audience in those households are growing at about 0.4% per year reaching 116.3 million in 2013. That smidgen of an increase is fueling hyper competition between cable programming providers like Cox Communications, AT&T, DirecTV and Dish.
One need not look any further than their mailbox to see cash back offers from each of these providers. AT&T routinely is offering $300 to $400 in a Visa rewards card for new Uverse, Internet and phone bundle. There are free upgrades and premium channels offered by Dish on a limited term basis, while Cox is offering a $200 prepaid Visa rewards card for new subscriptions on qualifying bundles.
Consumers say what they really want is a way to order the specific programming they want and pay accordingly on an “al a carte” type of system.
Kelly Zega, spokeswoman for Cox Communication, said the “a la carte” discussion is an active one in the industry, as “it comes with a complicated economic model and raises concern over stifling programming diversity.”
COX CONTOUR
She said Contour, a new service offered by Cox, is proving to be popular because it does offer a more personalized video experience that also provides for mobile access.
Zega explained that Contour provides recommendations for eight unique profiles and then tees up what customers already like and helps them discover more content that meets their personalized viewing habits with suggestions they might enjoy. She said each person in the household can have their own profile.
Though the Contour App interface users can view their personal programming choices which include access to more than 100 channels of live TV and 4,000 video on demand selections. This access is mobile helping to meet this growing consumer demand.
Lastly, Contour includes a DVR which can record six programs at once, storing up to 300 High Density shows.
“Customer response has been very positive and we’ve found strong engagement with both the recommendation engine on the primary screen as well as with the Contour app on the second screen,” Zega said.
She reports 99.5% of Contour customers are using the recommendations. Over half (56%) say it made them aware of content they hadn’t known about before.
“From May 2013 to May 2014, Contour customers went from average viewing of 22 channels per month to 29 channels per month,” Zega added.