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Week In Review: Cable Sub Losses Mount But Their Bottom Lines Don’t Care, “Let’s Make Our Own Roku!” Is Probably A Dumb Idea.


1.Cable Sub Losses Mount But Their Bottom Lines Don’t Care

Cable losses are mounting.

Again. 

AT&T lost 946K subscribers, Comcast lost 224K, Charter lost 141K.

But you know what none of these companies lost?

Money.

Why It Matters

Big Cable may be shedding subscribers, but revenues are up. 

That’s because while people are cutting one cord (pay TV) they’re upping the speeds they’re getting from the other (broadband) and paying more money for the privilege. 

Thus revenue from broadband has risen enough to cover the losses from pay TV. (Pro Tip: MVPDs don’t make a lot of money from pay TV and never have. It’s always been about creating stickiness, e.g., if you have the double or triple play, the odds of you leaving them go way down.)

What gets lost in the headlines about the “massive wave of cord-cutting” (a whopping 0.68% in 2018, mind you) is where these subscribers are actually going. e.g., are they switching to vMPVDs, to smaller MVPDs, or are they fully giving up linear pay TV?

We have no idea–there’s no research on the topic–but our gut says most of them are just fed up with the “Kmart service for Nordstrom prices” they’re getting from the MVPDs and are switching to vMPVDs.

Sort of like how smokers often need to use nicotine patches.

This is bothering us more than it should because it’s so indicative of all the lazy journalism out there, even from mainstream publications, where a “massive wave of cord cutting” is just accepted as fact and no one bothers to question where all these viewers are actually going and whether AT&T’s subscribers are mostly just fed up with the company’s confusing pricing plans and nasty looking interfaces or if they’re just fed up with pay TV overall.

What You Need To Do About It

If you’re a media reporter, stick to facts. If you have proof that something is happening, by all means report it. But if your stories are just based on things that sounds like they could be true, then you’re the reason we have so much #FakeNews. (And for the record, we’re not saying that people aren’t cutting the cord or that they won’t in much greater numbers post-Flixcopalypse. Just that if you’re writing a news story and don’t have any stats to back up your assertion, then indicate it’s an assumption or attribute it as some expert’s educated guess. But acknowledge it is not an undisputed fact.)

If you’re everyone else, realize that MVPDs are kind of like honey badgers when it comes to cord cutting—they just don’t care, because all it means is that you’re likely using faster broadband, which they can charge higher fees for and pass along price increases because it’s not like they actually have any real competition. (5G is still a few years off.)

2. “Let’s Make Our Own Roku!” Is Probably A Dumb Idea

Dave Zatz, who writes the ZatzNotFunny blog (a hidden gem), uncovered the fact that Verizon seems to be creating its own version of a Roku, some form of streaming box that they’ve recently filed with the FCC. It appears to be part of the same thought pattern that has AT&T rolling out its own proprietary steaming box too.

Why It Matters

It’s not a coincidence that AT&T and Verizon are both mobile companies, which means they will be rolling out 5G broadband sometime soon, and if they can sell their 5G subscribers a streaming set top box to go along with it, they’re no doubt thinking that’s all the better.

What’s in it for them is pretty obvious: they get a 2020s take on the old school set top box that they can use to collect data and serve up addressable ads. They’re hoping too, no doubt, that the box will create stickiness, as people will customize it and then not want to give it up. And there’s the revenue they’ll get from charging people for it and upselling them on a better/newer box.

For consumers, the equation is much less obvious: Roku and Amazon control over 70% of the streaming market (as per Parks this month) and app manufacturers are going to make sure apps on those device work first and work better than whatever boxes Verizon and AT&T are pushing.

Now in the MVPDs defense, there is precedent for rolling out their own boxes: in the early 00s, TiVo so dominated the DVR market that “TiVo” had actually become a verb. But then the MVPDs introduced their all-in-one set top box/DVR combination devices, and even though those devices majorly sucked compared to TiVo, they soon took over the market.

Why?

Because TiVo couldn’t get out of its own way.

The service had a business model that encouraged people to buy a lifetime subscription costing well north of $500, the devices themselves were very expensive however long your subscription was, you needed to be somewhat tech-savvy to set them up, and it was an extra box that needed to sit on top of your DVR.

The new combo boxes were rentals, which made it easy to get two or three of them, one for every TV in the house. They worked seamlessly with the MVPDs built-in set top box program guide and were installed by an actual tech guy who would set up the box and show you how it worked.

That may have worked twenty years ago, but we’re in a very different situation today. Roku and Amazon are only around $29, don’t require any sort of contract (monthly, yearly, or, especially, lifetime) and are pretty intuitive even if you have zero tech savvy.

And then there are all those Chinese-made TVs running the Roku interface, which now make up close to 30% of all TVs sold in America and don’t require any extra devices to run OTT apps. So there’s that too.

What You Need To Do About It

If you’re Roku and Amazon, probably nothing. There may be some users who are tech unsavvy enough so as to require their MVPD to provide them with a streaming box, but given your market penetration—and the fact that your respective operating systems now power so many smart TVs—you don’t really have much to worry about. So long as you don’t try and get people to sign up for a lifetime subscription, you should be okay.

If you’re a consumer, you don’t need one of these, unless they are giving it to you for free, in which case we’d upgrade the “no” to a “maybe.”