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VOL. 40 | NO. 5 | Friday, January 29, 2016

Ready to cut the cord on cable/satellite?

You might be able to get all your TV favorites for less. Here’s how

By Jeannie Naujeck

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If you’ve resolved to lower your bills this year, you might want to look at your TV screen. No, not for help from Dave Ramsey or Suze Orman, but at the cable connected to it.

Can you can envision life without hundreds of channels? If so, you might be able to save money by becoming a cord-cutter.

With so many new ways to watch TV shows and movies, a small-but-growing number of people are canceling their cable subscriptions and instead assembling their own entertainment package a la carte from the growing menu of alternative content providers such as Netflix.

Tennesseans who have cut the coaxial cable cite many different reasons. Saving money is one of them. But many say they just don’t build their leisure time around TV, or want to be more intentional about their watching habits. And they’ve found plenty of workarounds that allow them to get all the TV and movies they need.

“We dropped cable several years ago,” says CJ Hicks of Nashville. “When we want to watch something we use Netflix or Apple TV or sometimes stream via the Internet. The only things I really miss are some of the sports games that I love … Lady Vols basketball and other women’s sports. But overall, I’m happier without cable TV.”

Cutting the cord is still a relatively young phenomenon.

About 83 percent of Americans still pay for TV through cable providers like Comcast and AT&T U-verse or satellite companies Dish and DirecTV. But that’s down from 87 percent in 2010, and the rate of cancellations has been accelerating enough over the past few years to cause alarm.

Even holdouts like ESPN, which until last year was only available as part of a large bundle, is looking at new ways to get in front of people who are opting out of cable, and some who never got it.

Most “cord cutters” cite the cost of cable as one reason to quit, according to the Pew Research Center’s 2015 Home Broadband report. But 64 percent also say they can get the content they want through either a simple antenna, the Internet and services like Netflix, Amazon Video and Hulu that they can stream through their TV – what the cable industry calls OTT, or “over-the-top” services.

They include people like Jeff Thorneycroft of Inglewood, who has replaced his cable bundle with Netflix, Hulu and Amazon Video, which are currently considered the Big Three of streaming.

“I don’t care most of the day what’s going on on TV, but when it’s time to watch I will pay for what I want,” he explains.

“Before, I was spending $150 a month for all these channels I never watched. Or I would find myself watching something I wasn’t even interested in just because it was on.

“The way of the future is on demand.”

For his current setup, Thorneycroft bought an $80 Leaf antenna, which he says brings in “perfect” HD pictures of local major network affiliate channels, and pays $99 a year for Amazon Prime membership, which also carries other benefits.

The other two services are $7.99 a month each, although Thorneycroft is thinking of dropping Hulu because most TV episodes he wants to watch, like a buzz-worthy Saturday Night Live episode, can be found later on YouTube.

He still pays Comcast for high-speed Internet service, which he needs for his graphic design business, but says he’ll switch to Google Fiber when it arrives in Nashville due to a history of poor service from Comcast.

Thorneycroft also is testing a free trial subscription to Sling TV, a $20 per month, no-commitment “slim subscription” bundle of 23 popular cable channels such as ESPN, AMC, CNN, the History Channel, HGTV and the Disney Channel, with add-on packages of more channels available for an extra $5 per month each.

When it debuted last year, Sling TV marked the first time that ESPN had made itself available outside of a traditional cable package. Because ESPN pays out so much each year in exclusive rights to air sports, it has traditionally relied on revenue from bundled cable subscriptions. Whether you watch ESPN or not, more than $6 of your monthly cable or satellite bill goes to ESPN.

Eunice Zhou and her boys Zackary, 7, and Joshua, 11 surf through movies on Netflix which is what they use in place of cable. Eunice’s husband Xing says, “Comcast has a 300 gig limit and Google Fiber offers unlimited data,” which really excites them.

-- Michelle Morrow | The Ledger

But ESPN realized that with more people unbundling from cable, it would lose revenue. Even more tellingly, it wanted new ways to get in front of people in younger age brackets who are entering adulthood without thinking of a cable TV package as a must-have. ESPN executives say they’re in talks with alternative providers such as Apple to stream content through its popular Apple TV.

HBO and Showtime are seeing the same light. Last year, both began offering a standalone video app for $15 and $11 a month, respectively, that allows people to stream all their content through their TV with no commitment – and no cable package.

Reasons to resist

There are plenty of reasons to stick with a cable package. Cable bundling provides the convenience of one payment, instead of juggling a bunch of subscriptions.

“By the time you re-create what you want to watch, you’re very quickly paying the same amount of money for less,” says Robert Unmacht, a Nashville media analyst who subscribed to Comcast, Dish and DirecTV before settling on AT&T U-verse for what he says is a superior experience.

“By the time you pay your Netflix, Hulu, HBO … you’re pretty much paying what you were paying before, and you still need your Internet connection. How many $5 a months can people take?”

Brian Mansfield, who lives in Bellevue with his wife and children, says his household used to subscribe to the full slate of cable and other extra pay channels, like HBO, Cinemax, Starz and Showtime. As the kids grew up, they scaled back and now have only the bare-bones basic cable package.

Mansfield was introduced to Netflix after giving his mother-in-law a subscription to it for Christmas.

“She didn’t have a way of using the online part of the subscription, so we accessed that at our house. And that’s how we got hooked on the streaming service,” he explains.

Heather and Braden Land and their daughters Harper, left, and Adeline relax by the television on a snowy day. The Lands don’t have cable but subscribe to Netflix and Amazon Prime videos and get numerous HD channels through their Mohu antenna.

-- Jeannie Naujeck | The Ledger

“Then Amazon Prime launched its streaming service for customers, and we already had that. Then we gave Hulu a shot and realized how much we liked time-delayed viewing,” he adds.

“The only cable channel we ever watch is Food Network, and about the only things we watch on the networks in real time are football games.”

The Netflix model

Shifts in consumer preferences are happening in tandem with aggressive moves by Netflix, which started out as a DVD-by-mail service but now calls itself a “global TV network” – one that will stream 600 hours of new original content this year to more than 75 million subscribers in almost 200 countries.

It and other OTT services are vying for consumers’ discretionary viewing time, and they’re offering flexibility, affordability and an ever-growing catalog of content.

That may not be enough to lure people who are accustomed to the cable model.

Older people tend to stay fixed in their habits, Unmacht says. But younger generations have mobile lifestyles, more entertainment options and an ease with technology. They also barely remember a world without Netflix.

“It’s not necessarily cutting cable; they’ve just grown up using their iPad and other devices wherever they want to,” Unmacht explains. “That’s a big factor on the younger end, where most of this cutting is. In some cases it’s not cutting, it’s ‘never-weres’ - people who never had cable.”

That makes sense to Braden Land, 33, a Nashville real estate agent and musician who isn’t exactly a “never-were,” but is close. He and wife Heather, a nurse, subscribed to Comcast pay TV, then switched to AT&T to bundle TV with their phone service.

About a year ago the Lands dropped the plan and bought a $100 Apple TV box and a $20 Leaf antenna. With busy careers, two young children and music filling up their lives, TV watching just wasn’t a priority. Now they get local and network channels through the antenna, and watch shows and movies through the Netflix and Hulu apps on Apple TV.

“We thought we would watch less TV but it really hasn’t affected us. We wouldn’t sit down anyway unless it was a movie or documentary that we both wanted to watch,” Land says, noting that the boundaries between work, home and recreation are much blurrier for him than for his parents’ generation.

“Entertainment has to adapt as things get busier. If we’re going to keep paying for entertainment, it needs to fit in the palm of our hands so we can look at it whenever we find ourselves sitting for a few minutes. It’s surprising to me that cable is still kicking. They’ve got to be hurting.”

Industry focus changing

Cable is starting to hurt. Media companies stocks have taken a tumble as cable subscribers defect.

Last spring, the 13 largest pay TV providers saw their biggest drop in subscribers ever, according to Leichtman Research Group, which tracks the media and entertainment industries.

More than 470,000 subscribers canceled cable in the second quarter of 2015, compared to about 305,000 lost in the same quarter of 2014 – a 54 percent increase in cable defectors year over year.

Satellite TV services have taken the biggest hit, and while some cable executives predict this year will show growth in subscribers, Leichtman says it will probably come from former subscribers of DirecTV, Dish, AT&T and Verizon as people move to cable primarily for high-speed Internet service.

But that’s an area where cable companies are thriving. And in many cases, it’s now their primary business. Cord-cutters may not want 240 channels but they do need high-speed Internet access, and in Tennessee, Comcast is the biggest provider of unbundled Internet service.

The nine largest U.S. cable companies provide Internet services to about 50 million people, and in June 2014, the number of Internet subscribers exceeded the number of television subscribers – by a hair – for the first time ever, according to Leichtman.

And as cable companies invest more to provide higher speeds, the average price of Internet services has risen accordingly at large cable companies like Time Warner Cable and Comcast.

“Right now they make most of their money selling you the Internet. Cable’s secondary,” Unmacht adds.

“The picture you watch is no longer delivered through an analog stream. It is delivered to you through IP (Internet Protocol) technology. So when you subscribe to Comcast, what you’re watching is in fact an IP Internet-like stream. Your cable TV is just one more Internet service.”

A matter of choice

Thorneycroft says that while he pays for the Internet service from Comcast that supports his cord-cutting, he won’t go back to cable TV partly because he doesn’t appreciate being forced to accept a huge bundle of channels rather than just the few he wants to watch.

“It comes down to, are you a massive TV watcher or an occasional TV watcher? If I just want to see one episode, I’ll gladly pay $3 for it,” he says.

But Unmacht can’t see himself cutting the cord on his AT&T U-verse package. He’s pleased with the company’s service, and likes the ease of finding and recording his favorite shows on a DVR instead of hunting through apps to find something he wants to watch.

“People don’t change quickly, especially with something like TV where they’ve finally got it all set up,” he explains.

“But we do know that some people are cutting cable and some are just not signing up. What you learn when you’re young affects the way you live the rest of your life.”

“I’m only willing to speculate as far as, everything will be IP delivered. That’s going to happen in the next five years.

“TV disrupted itself. The Internet changed everything.”

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