It appears to be an odd relationship to say the least– the struggling cable providers pairing up with the streaming video services that have negatively impacted the cable-subscriber growth figures. The only company to have bucked this trend, at least momentarily, was Comcast (CMCSA - Free Report) . The company during its 2016 first quarter gained 99,000 triple-play subscribers, 125,000 double-play subscribers and 45,000 single-play subscribers – a total of 269,000 new cable subscribers.
To put these “successful” Comcast numbers into perspective, Netflix (NFLX - Free Report) gained 2.23 million new domestic subscriptions and 4.51 new international subscriptions during their fiscal 2016 first quarter, which is an impressive 6.74 million new total subscriptions. It’s pretty safe to say that Netflix is cutting into the cable customer-base.
(Also read: “The Netflix Tipping Point.”)
Back in August 2015, I wrote an article discussing the “death of cable” discussing declining revenues and ratings for industry giants like The Walt Disney Company (DIS - Free Report) , Viacom (VIAB - Free Report) , and CBS (CBS - Free Report) , as well as the pricing of cable packages versus “cord cutting” services like Netflix, Hulu, and Amazon’s (AMZN - Free Report) Prime Video. The overall sentiments of the article haven’t changed – traditional cable television service is becoming a nostalgic relic of the past.
The one thing that keeps these big name cable-communications providers like Comcast, Verizon (VZ - Free Report) , AT&T (T - Free Report) , Cablevision and now Charter Communications (CHTR - Free Report) (after they officially merged with Time Warner Cable ) from going completely under is that they are also the primary providers for Internet services – the key component needed to watch your Friends and Seinfeld reruns on Netflix and Hulu. Without an Internet connection in your home, have fun paying your cellphone providers a large amount of money per month to have unlimited data and being impractical by streaming content on your cellphones and tablets.
(Also read: “What Does Amazon's Monthly Prime Payments Mean for Netflix?”)
Telecom providers could easily begin to raise the prices of their Internet services to counter the decline in revenue from cable television subscriptions, yet that would generate serious hostility amongst the consumer base and streaming video services against these large telecom providers – and there is no need for unnecessary hostility, anger, and anti-trust cases brought to court.
Could this Partnership Work?
As the television viewing landscape continues to shift towards streaming video, why not have companies like Netflix and Amazon pair up with the likes of Comcast and Verizon to provide Internet and streaming services? This may appear to be an odd marriage at first, but this could be an idea worth exploring. Comcast and AT&T have the infrastructure Netflix needs and Netflix has the content the people want.
One of the main issues with cable subscriptions is that they simply offer too many channels compared to the number of channels an individual watches. They increase the channel numbers to add value to the per month price, yet it really isn’t valuable because all that does is add more networks that an individual is not going to view. Dish Network (DISH - Free Report) offers Sling TV that combats against these types of packages – $20 per month for 20 channels. Similar to Netflix and Amazon Prime Video, Sling TV is a streaming service needing an Internet connection to watch its live television content.
So theoretically, how could this marriage work? Essentially, there would have to be a partnership between the streaming services and the Internet providers. This partnership would then offer bundle packages for different streaming services and different Internet speeds as well as provide discounts on devices to use these streaming services. Sling TV, for example, allows its subscribers to add HBO for $15 per month and has a deal to get a free Roku 2 device for new customers.
Comcast offers Internet packages of up to 10 mbps, 25 mbps, and 75 mbps for $19.95 per month (promotional price), $66.95 per month, and $49.95 per month (promotional price), respectively. Netflix’s most popular package costs $9.99 per month, Hulu costs $7.99 per month, and Amazon Prime Video stand alone service costs $8.99 per month.
Internet providers like Comcast should rid themselves of these nonsensical promotional pricing where for $17 less you can have an unnecessary – if you’re living by yourself or with another person – 50 mbps increase in Internet speed and replace them with more logical price points and special promotions.
A Potential Bundle Idea
Since most people have at least 3 devices connected to the Internet at all times, a package with 25 mbps will be used in an example of a streaming service bundle. Here is a model that Comcast could potentially use:
- Price out the Internet to $35-$40 per month with no promotional pricing or contracts – a steady price throughout your time with the company.
- Have promotional pricing for the streaming services that the Internet provider has deals with.
- Offer a 2 for $15 for any combination of Netflix, Hulu, and Amazon Video or a 3 for $20 offer for a promotional period of 1 year.
- After one year, the prices for the streaming services go back to their original price per month.
This is merely one example of what these companies can do to join forces and make Internet and streaming services even more accessible to individuals. The key for these communication companies is to avoid promotional pricing and replace them with fair, competitive per month prices for Internet services. That’s how these companies can rebuild their customer base, not by having 25 mbps Internet cost more than 75 mbps Internet during one year. It simply makes no sense.
Netflix, Comcast, AT&T, and Amazon need to give the people what they want: simple pricing for the content that they want to watch. Embrace the evolution of television and work together.
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