A Business Technology Place

I cut the cord on cable TV

I cut the cord (cable TV).

Yes! Whoo hoo!Cut the Cord2

I’ve been thinking about this since 2009 when I first wrote about online alternatives  and mail order alternatives to TV.  I didn’t cut the cord back then because the alternatives for live TV were not compelling enough to replace live sports and didn’t present a strong enough case to get my family away from TV. Then last year we added a Roku stick to a couple of TVs and Netflix.  This week I added a subscription to Sling TV and validated a HD antenna could pull local TV stations.

Then the final event that I needed happened. My cable TV company sent me a letter that the “promotional pricing” from last year was ending and that my monthly bill would be $55 higher. They were increasing the price of the cable TV, Internet, and charging an additional monthly fee for a HD converter.  (I should note that the HD converter is required to have cable now but they also charge a monthly fee for it above the TV content cost).

The surprising part of all this.

When I called the cable company to cancel the TV service they did not try to retain my business.  I’ve done this in the past to see how they could help lower the overall cable bill. That’s when they put me on the promotional plan. But this week I told them I was ready to cancel because the availability of alternatives had reached a point that I could find content to watch easily and that it didn’t make sense to pay over $100/month for cable TV.

That was it. I’ve been paying this company for cable TV for 25 years. It ended with a 3 minute phone call.

The economics of it.

For basic cable TV and three HD converter boxes I would be paying about $110/month for what they call the basic package. In my current setup with Netflix, Sling, and MLB.tv I have a monthly outlay of about $40/month.

To be fair, I still have a few one-time costs to add because I will purchase a few more Roku boxes and do something to make the HD antenna signal available to more TVs.  But I like those numbers.

The better win.

The way we watch content on TV has changed. With cable TV, I was confined to a screen in a location of my house.  I was limited to watching programmed content that someone else chose for me. I could record a few shows and change the time if I wanted. I paid for hundreds of channels that I never watched.

The new model is streaming the content to a number of devices including PC, tablet, and a traditional television. I choose the stations I want to pay for and for the most part the content I want to see. If I don’t use a service, I can cancel at any time.  Additionally, much of the content I watch is streamed commercial free.  I can flex add and delete services as needed or as my viewing habits change. CBS and HBO are two examples of content providers offering monthly subscriptions. Expect to see more of that from other providers.

A great example of this new flexibility happened just this week. I am writing this post from a hotel room while on a business trip. I haven’t turned on the TV in my room. Instead, I was able to stream a baseball game for my team through mlb.tv to my computer. I could not watch that game from the TV in my room because it’s not local market. Then I was able watch a movie that I chose on my tablet.

We’ll see how this progresses over the next few months. But I bet, I’m not going back to traditional cable TV.

Onward and upward!

Would Netflix original content make it through your Shark Tank?

How is Netflix making money on their original content series?

Their latest release, Marco Polo, is reported to have cost $90 million for 10 episodes. At $7.99 a subscriber you can do the math for payback and ROI. But wait. This isn’t the first show Netflix has made costing tens of millions. The popular of House of Cards and Orange is the New Black head-up a rapidly expanding list of Netflix original content. At face value the strategy appears to be a money pit of immense proportions. I’ll admit that the business case was not immediately clear to me.netflix original

Matthew Ball provides an excellent economic review of Netflix original content for the Ivey Business Review. Reading Ball’s analysis you can start to feel Netflix’s business drivers of customer retention, third party licensing costs, and the ability to price subscriptions based on value received. Competition in streaming video services is increasing as more media outlets provide options for content. Netflix struggled with a price increase in the past. Even with the advancement of technology, availability of exclusive content, and increased hours of viewing it will be tough to have significant price increases in the future because competition is growing. Netflix appears to be positioning itself with premium content, but probably can’t afford to have premium prices.

Long term thinking.

Making business decisions for the long term is a good concept to debate. If you’re in a business school, chances are you’ll go long. If you’re in a strategic business meeting, chances are you’ll go short. I’ve experienced both settings. When you talk theory in business school everyone takes the side of keeping the company relevant for years to come. But in a real business, the conversation tends to gravitate towards the next quarterly earnings release, the stock price, the owners tax return, or how to not get sued tomorrow.

Yet, I see the massive cash investment from Netflix as a great example of long term thinking. The payback of the subscription based viewer model comes from attracting and retaining subscribers. Unlike cable TV which had the ability to essentially hold subscribers hostage for years based on the availability of content options, Netflix subscribers are free to go at any time. (Not to mention they don’t use term commitments!) But think about this. The number of traditional pay-for-tv subscribers has started to decline. There’s an oncoming avalanche of “cord cutters” and Netflix is positioning themselves to catch a large percentage of the money shift. They offer services for a fraction of the cost of cable TV and provide an increasing amount of content. All of it commercial-free.

The cost to borrow money is cheap right now. Ryan Bushey, of the Business Insider, points out that Netflix can borrow in the short term to make more on the investment for the long term. Controlling the price in the future is a smart bet. When is the last time the price of content from Hollywood studios went down?

My experience with Netflix original content.

I’m a Netflix subscriber. My first viewing of an original content series prompted this post because it made me think about the business economics as part of my experience. Plus the entire model of watching shows is different on Netflix.

The traditional TV series season lasts for months. Viewers wait a week between episodes. They watch commercials throughout the viewing. So in a 60 minute episode, a viewer may get 45 minutes of entertainment. Netflix releases the entire series of the original content at the same time. It’s Commercial free and available for binge-watching. It’s a different model and fits our instant gratification culture. Oh by the way, if you think about it, this all started with VCR and DVRs. We started recording shows to watch them when we wanted. We could skip commercials. We could watch episodes back-to-back.

My experience? In a word, satisfying. I like to watch content on-demand on my schedule. I don’t typically watch content during the work-week. But I may use content watching on the weekend as a time to “wind down” and relax. I like uninterrupted episodes that allow me to watch past an arbitrary stopping point that keeps me hooked for another week of waiting. The quality has to be there as well. I was satisfied with the plot develop development and level of acting in the series I chose to view.

So in a make-believe setting, would Netflix original content make it through the Shark Tank assuming it was a startup-up looking for seed money? Interesting question. Netflix original content is competing to take away viewers from Shark Tank. But the Sharks tend to like the risks that will pay them royalties month-over-month and that have a realistic chance of succeeding.  So imagine you’re a shark. The question is for you. Netflix is asking $7.99 a month with no monetary return. The return is in the form of exclusive original content. Are you in or out?


Disclosure: I am a paying Netflix subscriber.

This is my 400th blog post on Merchantstand.com

Roku Streaming Stick

I had a television content problem.

Charter Communications went to a digital only network a few months ago and started requiring set top digital converters to unscramble program content. I’m not bashing Charter in this post for their decision, but when they did this, the two small TVs in my basement became unusable. I have a wall mounted TV in a workout room another one in a game room. Both have a cable coax drop next to them. But I don’t use them enough to warrant paying $20/month for two set top boxes and they don’t have a place to mount a set top box unless I created a stand or somehow mounted them on the back of the TV.

In a perfect world, I would not have cable TV service at all. I previously wrote about my obsession with dropping cable TV and cable TV online alternatives. But I also don’t want to create a family revolt. For right now, it simply is what it is.

HD Antenna Trials.

I tried a couple of different HD antennas for local programming and because I could mount the antenna behind the TV. I’m about 35 miles away from many of the major network broadcast antennas. The antennas provided limited success. The problem is that both of my TVs are in a basement and not near a window. Even with a power booster, the reception was spotty at best.

Enter Roku Streaming Stick.

My next thought was to buy a Chromecast HDMI stick to put in the TVs and then simulcast from a tablet near the TV. That would work for some content and provide an alternative to cable. As fate would have it though, when my wife was shopping at a local retailer they didn’t carry Chromecast. They had a Roku streaming stick and after some preliminary research we decided to give it a try.Roku_Streaming_Stick-20

The Roku streaming model was a closer fit for what I wanted. In the Roku system the device streams content directly to the connected screen and not as a simulcast. Since my display device is a wall mounted TV, I didn’t want to have to bring a tablet with me to view the content.

Roku Experience.

The installation of the Roku was simple. Plug the stick into a HDMI slot and the AC adapter to wall for power. Then change the source on the TV to HDMI and follow the onscreen setup. The process asks questions about language and wifi connectivity. Once configured an installation key is displayed on the screen with a URL and you simply go to a website to register the device.

After installation, the Roku menu presents applications much like a phone or tablet. There is a base set of applications or you can add more through the on screen Roku menu or via a computer hooked to your account.

Roku solved my television content problem.

It streams Netflix. It streams news channels with clips of recent news. It streams ESPN with live sports. It streams live music through Pandora. Let’s just say it has options. There are over 1000 app channels. Some of the channels do require separate subscriptions (like Netflix), but the Roku service is a one-time fee for the price of the stick. There is no recurring fee for the roku service. This is the type of solution I was looking for on those basement TVs that don’t get used everyday.

Oh and it still fits within my dreams to dump cable TV service. One day I’ll get there!

Owned Media or Media-on-Demand?

My use of owned media, items I have purchased, is pretty much dead. I have a collection of music and video that I have purchased over the years. But I don’t often use them. I instead opt for video and music on-demand from services like Redbox, Netflix, and Pandora. How often do I watch those DVDs that are on a shelf? How often do I play music from my library of mp3 files? Not often.

If there is a movie I really want to see, it’s typically available from an on-demand video service. I can rent and play three times before I cover the price to buy and own. That math works in my favor the vast majority of the time.

I do reference my library of music from time-to-time when I run outside. But now I can also substitute Pandora radio for a refreshed music list. I don’t mind the commercials so much and could opt for the subscription model and still come out ahead of buying to own.

My Amazon Prime 30 Day Trial Experience

Why I tried Amazon Prime.

I have a small obsession in my life; I want to ditch the monthly cable bill. The problem is, the other members in my family enjoy the cable service and want to keep it. So my quest for a lower monthly alternative to television programming continues year-after-year. To be fair, they consume more video content than I do. I’m sure the TV industry is thankful that my television consumption habits are in the minority. My family likes current programming offered by the networks and cable channels. They use both the cable on-demand service as well as a DVR to record content.

My latest test was the Amazon Prime service. At the end of the first 48 hours my kids told me they didn’t see any value in the service and my wife reminded me that she was right (again). She had told me before that Amazon Prime is intended to serve as a video supplement to television programming, not a replacement of the primary content source. Based on her expectations and viewing habits, I’ll say I have to agree with her.amazon-prime.jpg

To review the service I used several devices:

* A Samsung TV via ethernet hookup Amazon Prime App
* A Sony DVD player via ether hookup and Amazon Prime App
* An iPad
* A PC

 The Good.

The Amazon Prime annual fee is $79 and includes three services:

1. Free 2-day shipping on purchases
2. Free video streaming for select content
3. Access to the Kindle lending library

The shipping fee scales well for high volume internet purchasers. If standard delivery is typically around $6 then you would break-even after 13 or so purchases while getting a faster delivery. (Read how Amazon prime is very profitable for Amazon). I didn’t sign-up for the trial based on the shipping feature, but for many consumers this is the primary draw to the service. We did take advantage of the free shipping with a few purchases during our trial period. But in general I don’t purchase items online where I have to have 2-day delivery over standard shipping. I’m content to have standard delivery. Associating the 2-day delivery service with Prime is a brilliant marketing program and is generating millions in profits for Amazon.

At $79/year that is $6.58/month which is better than NetFlix at $7.99/month. Plus you get more with the Amazon subscription. To be fair to Netflix, should compare content libraries. But, agreements with studios aside, the services are similar.

I own a Kindle and do occasionally purchase books from Amazon for it. I also use my public library from time-to-time. I like this feature as an alternative to buying books that I’ll read once and probably never touch again.

The quality of the content on the high definition streaming was excellent. I had minimal issues with disruptions of the stream.

There were no commercials for television content. We streamed an episode of Grimm Season 1 commercial free to test for this. Similar to mindset of a paid music subscription, consumers expect if they are paying for the service then they can see it advertisment-free.

It is possible to start consuming content on one device, pause it, and then resume on another device.

The Bad.

Most of the videos included with Prime are old. Maybe that’s the point. Is this just suppose to be a digital library? If so it’s certainly better than buying videos, watching them once or twice and then sticking them on a shelf. But if you are looking for recent movies like what you find at Red Box, they are not included as part of the Prime subscription. You can buy or rent those movies for additional fees.amazon-prime2

Access to television shows are tied-up with network contracts. I went to see a season 1 episode of NCIS from 2003. The only option is to buy episodes. Yet Grimm Season 1 from 2011 is available for free streaming for Amazon Prime members. Access to same season episodes is available for purchase. I should note that we can get access to current television programming via the cable on-demand service.This single limitation is the main reason why Amazon Prime isn’t a cable replacement alternative for my other family members.

I was able to define a watch-list using my computer for content that I wanted to queue for later viewing. But the two TV devices I have don’t show the watch-list from their console. It appears this is for computing devices only.

The Ugly.

The Samsung TV and Sony DVD player GUI is a bit clumsy and slow. I found the best way to get something was to just type it in the search box. The Samsung TV interface was extremely sluggish on response time. This may have more to do with the age of the equipment.

Some closing thoughts.

Could this replace cable TV? For me yes. I don’t watch much television programming and if I want to see something current then I can typically find it on the web site of the provider. But I couldn’t help thinking that services like this change the model of video consumption. It’s not as easy to “channel surf” with no real goal in mind. In most cases you have to make a deliberate decision to watch content because changing content takes longer than changing channels.

I think the financials of Amazon Prime are a good consumer deal if you are willing to lock into Amazon for your retail purchases. My experience is that this is not a bad thing because for commodity items, Amazon often has the lowest or close to the lowest pricing. The shipping component for purchases is the way to get payed back for the subscription fee. The free video content is just an extra nice-to-have, and should not be a primary consideration of paying the subscription.

I’ll most likely cancel the service before the 30 day trial completes. It didn’t satisfy my video content needs (getting rid of cable) and I don’t know that I want to lock into the Amazon retail experience to feel like I’m paying myself back for the subscription price.

My war against the cable television bill continues…