Ditching cable in 2017? What you need to know about streaming TV
By Robert Channick, Chicago Tribune
If your New Year’s resolution includes cutting the cable cord in favor of internet television, you’re not alone.
Fed up with the rising cost of traditional pay TV and emboldened by competitively priced streaming options, a growing number of viewers are expected to turn in their cable boxes and make 2017 the year of the cord cutter.
Internet television, also known as over the top, bypasses cable and delivers video directly to viewers through a broadband connection. Major players include subscription video-on-demand services such as Netflix, Amazon and Hulu, as well as linear streaming services such as Sling TV and the recently launched DirecTV Now, which air dozens of cable channels in real time.
Cord cutters and cord shavers — subscribers who trim their cable packages — are part of a shifting pay-TV paradigm. Millennials are at the leading edge of the trend, with 89 percent watching internet television, according to Horowitz.
“Streaming has reached critical mass and it’s actually the new normal for millennials,” Horowitz said.
A wealth of content has turned internet TV from homegrown cat videos into mainstream programming. From Emmy Award-winning original shows such as “House of Cards” on Netflix to broadcast networks and cable staples such as ESPN, choice abounds. Internet TV also gave rise to binge watching, and allows viewers to take the shows wherever they go on portable devices.
Traditional pay-TV remains the norm for nearly 100 million households in the U.S., who pay an average of more than $100 per month to their cable or satellite provider, according to Leichtman Research Group.
While many viewers subscribe to both a traditional pay-TV provider and an internet-TV service, an increasing number are abandoning cable and satellite for “skinnier” internet bundles of programming.
“You’ve got an inexorable decline in (cable and satellite subscribers) happening because of online alternatives,” said Ian Olgeirson, an analyst with research firm SNL Kagan.
There were 99.5 million traditional pay-TV subscribers in the U.S. at the end of September, down 1.3 million year-over-year, according to Olgeirson. Pay-TV subscriptions, which peaked at 101.5 million in 2012, are projected to drop to 93.9 million by 2020.
That loss will be offset by growth in internet video-only subscribers, Olgeirson said. The 11.4 million households that currently subscribe to video services such as Netflix and Hulu, but not cable, is projected to reach 15 million by 2020.
Olgeirson said another 1.5 million U.S. households subscribe to streaming services such as Sling TV and DirecTV Now, a number projected to hit 6.1 million by 2020.
The cable industry increasingly has staked its future on building out high-speed internet networks, with broadband internet subscriptions projected to reach 71 million over the next 10 years, or more than 1.6 times the number of video subscriptions, according to SNL Kagan.
While traditional pay-TV companies may control the pipeline to deliver internet video, some also are looking to provide the content — even at the expense of their core subscriber base. Satellite providers Dish Network and DirecTV, for example, are bypassing their own dishes with internet offerings that offer much of the same programming, but at a lower cost.
Sling TV broke new ground when it was launched in early 2015 by Dish Network as a slimmed-down streaming alternative to satellite and cable services. While Sling TV declined to disclose its subscriber base, SNL Kagan estimates it reached 925,000 households at the end of September.
A subscription to Sling TV ranges from $20 for a 30-channel package to $40 for a 50-channel package, with premium channels such as HBO and Cinemax available at an additional cost.
In November, DirecTV, owned by AT&T, launched its own streaming service called DirecTV Now. Packages range from $35 per month for 60 channels up to $70 per month for 120 channels.
Not surprisingly, some analysts predict DirecTV Now will cannibalize existing DirecTV and AT&T’s U-verse subscriptions.
“We expect most DirecTV Now subscribers to be incremental to our premium DirecTV base,” said Phil Hayes, a spokesman for AT&T. “There is a very large segment of the market that we are currently not reaching for which we believe this service is a perfect fit.”
Hulu and YouTube also are expected to roll out streaming services in early 2017.
The Citizens Utility Board, an Illinois nonprofit watchdog group, this week released its first guide to help pay-TV customers cut costs, offering advice on everything from negotiating less-expensive cable packages to cutting the cord completely.
CUB conducted Google consumer surveys in Illinois this fall that found 75 percent of pay-TV subscribers said their bills were too high. Surveys also showed that 77 percent of consumers who cut the cable cord said they did so because of high bills.
“A lot of people in Illinois are very frustrated about their cable bills,” Jim Chilsen, a CUB spokesman, said at a news conference announcing the pay-TV guide. “But before you flee your cable company, try to engage your cable company and try to get a better deal.”
Among the suggested tactics for lowering your cable bill: Go directly to the retention department and tell them you are taking your business elsewhere.
Chilsen advised people trying to negotiate a better deal to be wary of promotional packages, which could make their bills even larger once they expire.
Cord-cutting may not be for everyone, Chilsen said, but the advent of streaming TV gives consumers a bargaining chip to negotiate with their cable provider.
“While streaming services are still a relatively small portion of the TV industry, it is putting some pressure on cable companies and I think people should try to take advantage of that,” Chilsen said.
There is, of course, an even cheaper option — watching free over-the-air broadcast channels with a digital antenna, often as a companion to over-the-top subscriptions. A new generation of inexpensive digital antennas can hook up directly to high-definition televisions and pull in most local stations with surprising clarity.
An indoor antenna typically works well within a 25-mile range, with powered versions available to help boost the signal. Beyond that, an outdoor antenna may be necessary, according to antenna manufacturers.
Olgeirson pegs over-the-air TV viewership at about 13.6 million homes, a number that is projected to reach 14.6 million by 2020.
At the other end of the spectrum is Layer 3 TV, a broadband-delivered cable service that launched in the Chicago area in September. The Denver-based company is looking to lure disgruntled cable subscribers with bulky $120-and-up packages, cutting-edge technology and a focus on customer service.
While cord-cutting is all the rage, Horowitz said Layer 3 may be well-positioned as millennials age.
“There will be more cord-cutting coming up, but we might start to see it swinging back as well,” Horowitz said. “Millennials are moving into their homes and bigger apartments and big screens. Maybe we’ll see them get wired.”
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