Unhappy subscribers have been ditching cable for a while now. But if you want more proof that the current cable TV business model simply isn’t working, cable companies themselves are cutting the cord too. While the headlines have been dominated by news of the Comcast/Time Warner merger, which would affect over 30% of cable subscribers in the United States, it’s easy to forget that much of the country is served by smaller cable providers, many with fewer than 1 million subscribers, and some with fewer than one thousand. While a company like Comcast makes more money off of monthly equipment rental fees than they do from the Olympics, for the rest of the pay TV business, companies are beginning to wonder whether it’s worth the trouble.
For consumers as well as for cable providers, a point of contention is always those big cable bundles. But the networks are as much to blame for that as the cable companies. In order to get popular channels, in particular ESPN, companies are also forced to take on a slew of other channels, which cable companies have as little desire for as their customers do. And every few years, the threat of channel blackouts or losses looms as cable companies and networks renegotiate their deals. Meanwhile cable subscribers are down, and those that remain are most often unhappy with their service. Those companies with the fewest subscribers have less negotiating power, so the high prices demanded by the networks can be all the more difficult to bear.
The answer for some has been to stop offering cable TV, simply becoming internet service providers instead. It’s hard to imagine that ditching a huge portion of a company’s business would be a wise business move, especially considering that cable TV is known for its high profit margins. But for smaller companies, it’s worked out well. They save time and money by not having to pay for content or deal with the networks. Customer service also gets easier without having to field so many calls from frustrated cable customers. Providing Internet access is a much easier business to be in, because as people cut the cable cord, they continue to rely on the Internet, even more so than ever before.
Some day over-the-top services may no longer be “over-the-top” as they begin to replace the traditional phone and internet services that they once ran over the top of. And while some companies seem to resist this change, others don’t seem to have any problem becoming little more than pipes for these new services. The wires that once delivered cable TV and wired telephone service into American households, now often provide only Internet access. With video solutions like Netflix, Hulu, and Rabbit TV, as well as voice-services like Skype, it’s likely that the Internet service will eventually become the only connection many homes have with the outside world, replacing both cable and landline phone service. The cable and phone companies of today will become little more than ISPs, the means by which the many products and services offered by the internet reach consumers. It’s not hard to see why, as online alternatives are often cheaper, higher quality, and more innovative than their traditional counterparts.