NEW YORK — Cord-cutters rejoiced last week after HBO and CBS announced plans to sell stand-alone streaming services, a move that cable and satellite television providers have resisted for years. Customers tired of paying big fees for hundreds of channels they never watch just to have access to a few favorite shows might be expected to start canceling cable service in droves. Get Netflix, throw in HBO, add a network here and there — why would anyone sign up now for cable?
Well, don’t sound the death knell for cable companies yet.
Some would-be customers may balk when they see just how much paying a la carte actually costs. Stations that offer services a la carte will have to pay for marketing that the cable and satellite companies usually cover. Fewer eyeballs on live TV could mean less advertising revenue, since online ads are generally cheaper, and that will boost the network’s cost of running the channel. And smooth streaming costs money: To avoid so-called “throttling” during peak evening viewing times, Netflix buckled to broadband distributors like Comcast and Verizon and paid up so that its streaming service would run at a higher bandwidth and work more smoothly. Those added costs might be passed on to customers.
Cutting the cord won’t mean cutting out your cable provider. They often own your favorite channels (Comcast owns NBC Universal, parent of Bravo and USA) and often are the gatekeepers to the Internet.
“The cable business is evolving from mainly selling you a pay TV package to mainly selling you a broadband Internet service,” says FBR Research analyst Barton Crockett.
The cable and satellite television industry is going through major consolidation, to mitigate the higher cost each year of carriage fees that the networks charge for their channels and boost pricing power. Comcast Corp. is buying Time Warner Cable Inc. for $45 billion. AT&T Inc. is planning to buy satellite service DirecTV for $48.5 billion. Both are under regulatory review; customers complain such deals would create monopolies that would hijack choice.
Meanwhile, pay-TV subscriptions have flatlined at about 101 million, according to data from research firm SNL Kagan.
