Features — 27 October 2014
Last week’s announcement of HBO’s departure from Big Cable caused ripples in the industry and conceded Netflix as the winner of the race to “become HBO before they become us.” The Initial feedback from consumers at large was extremely positive, myself included.
A rush of relief and diabolical glee ran through my head. Take that Comcast! See ya later customer service representatives who cannot tell me why my bill increased by 60%! The two hours per month I once reserved to sit on hold, get transferred to a useless gatekeeper disguised as a call center agent, explain my situation, be told that they couldn’t help me, sit on hold again, transferred again, etc., I would now get back in sweet, sweet content. What would I do with my newfound time and savings? The aroma of choice was in the air, and I was wafting the scent toward my nostrils, excited to ceremoniously take scissors to the coax. As the week wore on, however, the reality of this seemingly progressive move started to sink in, and now I’m not so sure I like what I see.
First, let’s think through the transactional impact. Let’s say, as we’ve already seen, that network TV follows this model and in the future, consumers will choose a la carte which channels they are going to pay for across the spectrum. I watch NBC, FOX, ESPN, Comedy Central, and HBO. My better half watches ABC, Bravo, and TLC. (Not so) hypothetically, each network will deliver their content over the internet, through an app on my TV, mobile device, you name it, for $10 per channel. That’s $80 per month. Even at $45 per month for meager internet bandwidth, that puts my entertainment utility bill at $125 per month, which is marginally better than what I already pay for hundreds of channels. Now I also have to manage eight billing relationships (9 if you count the ISP) instead of one.
Secondly, let’s eye the operational ramifications. As Madeline illustrated yesterday, Netflix is a data and analytics company; their currency just happens to be film and TV content. The reason why Netflix has 36 million subscribers and accounts for 34% of internet traffic is because their experience has been optimized over the last seven years that they’ve offered streaming. This decoupling asks traditional entertainment companies to become service providers. If these networks are to be successful, they will have to anticipate the server workload from the existing customer base as well as the new subscribers so that I can quickly receive HD quality entertainment without encountering a buffering screen every 30 seconds. As more consumers rely on the internet for entertainment delivery, current bandwidth channels will begin to choke on the traffic, exacerbating the problem. In addition, no two networks’ app interfaces will be the same, causing a varying experience for navigating to the movies and shows you want to watch. Don’t even get me started on how long it will take to “change the channel.”
Finally, I’d be naive to neglect the political consequences of our “choice.” Big Cable will not be happy with the middle man being removed and, oh yeah, by the way, they deliver the internet. Because of this, we’ll see a few things happen: 1) In addition to paying for a level of bandwidth, consumers will also be allotted a total amount of data per month, similar to cell phone usage. If you exceed your data plan, you pay through the nose. 2) Because less money isn’t an option, Big Cable’s loss in revenue will have to be made up for in other places. Where might that be? You guessed it– the internet. Consumers will pay a substantial premium for the ability to use the net as they do today, hence why the battle for net neutrality is as important as ever.
Suddenly, the illusion of choice doesn’t feel so liberating, does it? Even worse, we don’t have an option to participate in this war; whether we like it or not, this reality is on the horizon for everyone. And during the month of Halloween, this is what truly scares me.