Three small-sized cable television operators have announced plans to wind down their traditional pay TV services and push customers toward streaming cable-like replacement products. It’s a move that one industry expert says will become part of a much broader trend as cable companies shift their focus toward higher-margin broadband offerings.
Since the start of December, thousands of customers in Alaska, Nebraska, Indiana and several other states have received notices from their local cable operator that they will soon need to purchase a streaming cable replacement like Sling TV, YouTube TV or Hulu with Live TV if they want to continue watching cable news and certain sports in the future.
In Alaska, Ketchikan Public Utilities (KPU) said around 1,200 cable TV customers will need to find a streaming option to receive the channels they want by next September, when the company plans to shut off its pay TV product. In an interview with the website Policyband, a KPU executive said the decision to shut off cable TV was driven by a desire to save around $500,000 on replacement cable TV boxes and an uptick in the number of streaming cable-like services on the market.
In two other states, Great Plains Communications (GPC) is swapping out older cable set-top boxes with Amazon Fire TV Sticks, which are being given to customers ahead of that company's pay TV shutoff. In place of its legacy cable service, GPC partnered with TiVo Platform Technologies to develop GPC iTV, a streaming product that costs about the same price as its older cable plans but includes cloud DVR storage, a three-day watchback feature and the ability to stream linear pay TV to other devices like Apple TV and Android TV.
Duo Broadband, a Kentucky-based cable provider, is taking a different approach: Rather than pointing customers to a particular streaming cable replacement or developing its own, the company has partnered with the online marketplace MyBundle to offer its broadband subscribers access to more than 100 free and premium streaming products, some of which offer cable channels over the Internet.
In late 2020, MyBundle co-founder and CEO Jason Cohen told this reporter that small- and medium-sized cable TV companies were "looking to get out of video," saying those products were bringing in more complaints from frustrated consumers than they were money. In an interview with StreamTV Insider last week, Cohen reaffirmed his remark, predicting that "there will be hundreds of companies shutting down [their pay] TV within the next 36 months."
"The Tier 2 and Tier 3 video landscape will look markedly different three years from now than it does right now," Cohen said. "And, that's, I think, me being a little conservative — I think it will probably happen faster than that."
Programming-related costs are one reason why cable companies are exploring ways to ditch TV in favor of broadband. In October, the American Television Alliance — which lobbies on behalf of cable and satellite companies — said fees charged by TV station owners for the right to redistribute channels on pay TV platforms rose to $11.7 billion in 2019, three years earlier than what market research firm SNL Kagan predicted in 2016.
Rising retransmission consent fees are problematic for cable and satellite companies, because those costs are ultimately passed along to customers in their bills. Last month, pay TV provider DirecTV said around $20 of a customer's bill is attributed to fees charged by broadcast TV companies, a figure that doesn't include the cost of delivering other cable channels in a subscriber's package.
While not immune from the same cost structures as traditional pay television providers, streaming cable alternatives are generally cheaper by comparison. Cohen said cable companies that ditch video and focus on building out their broadband businesses are setting themselves up to enjoy better margins and fewer customer complaints.
"If you look at a before-and-after-shutting-down comparison, it's not just getting rid of the TV headache, and it's not just happier customers saving money — it's actually better for the business, because there's higher broadband margins," Cohen said. "You get people to step up from a 50 Mbps (Megabits per second) broadband and TV product to 150 Mbps broadband without TV."
For those customers who do want a broadcast and cable TV solution, Cohen said MyBundle is primed to work with those subscribers to help them find the solution that best suits them — and the company also delivers a suite of marketing and educational tools that help cable TV companies cut the cord, too.
"We're here, not just for the transition out, but for the next 10 years and beyond," Cohen affirmed. "Because, ultimately, we think we're building the solution for streaming aggregation and content discovery."