Going Streaming-Only May Not Eliminate the Pain of Cable
Let's face it: No one likes paying their cable bill. You're charged a hundred dollars or more for hundreds of channels you don't watch, and outside of going without television, there seems to be little choice than to keep paying whatever Comcast (CMCSK) or Time Warner (TWC) is charging.
Streaming companies including Netflix (NFLX) and Hulu have taken some of that pressure off having to have cable, and so far it's come with much smaller bills. But the streaming future might not be the utopia of content some think it will be. In fact, it'll probably look a lot like cable someday.
Why Cable Bills Are So Annoying
The reason cable bills are so disliked is the feeling that there's little choice and terrible service behind them. Cable companies bundle channels we like with ones we don't and then offer some of the worst customer service, according to multiple consumer studies. Since they run a virtual monopoly in most cities, why offer better service, more selection or lower prices?
Even if you'd like to leave cable, there are precious few options for you to get the content you want. You could buy satellite TV, which comes with many of the same downsides of cable, or you could buy shows individually on iTunes or DVD, but that gets expensive very quickly. The problem is that content is tied to cable and content is what people want.
Content Is King
The reason streaming platforms like Netflix, Hulu and HBO Now have had success over the last few years is the amount of content they offer on demand for a fairly low price. You can watch thousands of shows for $7.99 to $14.99 a month.
But this starts to get really expensive the more streaming subscriptions there are. If you have Netflix, Hulu, and HBO Now, your bill is already $30.97 a month. That's without any live sports and doesn't include broadcast TV. By offering products you want separately, instead of in a bundled package, streaming companies are slowly pushing costs higher by adding more subscriptions and that'll only get worse as more content companies offer streaming models. In the future, you may not have a $100 cable bill, but you may have a half-dozen or more $15-a-month streaming subscriptions, which could quickly eat up any savings streaming may seem to offer today.
Why Streaming Won't Solve Anything
The current selection of streaming subscriptions is like an entree for consumers and content companies. It's showing that streaming is possible and popular, but it's just the beginning of what we'll see in the future. And that's when the model will change to something much closer to cable.
The problem is that a relatively small number of content companies own a vast majority of what you see on cable -- and Hulu and Netflix, for that matter. Disney (DIS), Comcast's NBC Universal, Viacom (VIA), Time Warner (TWX) and CBS (CBS) are the dominant players in media today, owning some of the most attractive assets to cable, and eventually streaming companies.
Media Company | TV Stations and Movie Studios |
|---|---|
Disney | ESPN, ABC, ABC Family, Pixar, Marvel, Lucasfilm |
NBC Universal | NBC, CNBC, NBC Sports Network, USA Network, Universal Studios |
Viacom | MTV, Nickelodeon, VH1, BET, Comedy Central, Paramount |
Time Warner | HBO, TNT, TBS, CNN, Warner Bros. |
CBS | CBS, The CW, Showtime |
Source: Company websites
If all of this content moves to streaming, independent of a cable subscription, you can bet that these companies will want to bundle their own content together. Disney doesn't just want to sell you ESPN, they want to sell you ESPN 2, the SEC Network, ESPNU, ABC Family and maybe others. Viacom will want to bundle MTV with Nickelodeon, VH1, BET and Comedy Central.
The result will be the same dilemma consumers face today: Pay for the bundles that include content you don't want, or go without the channels you want to see. The only change may be that we'll have five or more bills to pay each month from each content provider instead of one.
Be Careful What You Wish For
Cable may have its downsides, but streaming television may not be much better in the long run. A small number of companies own almost all of the content that's in demand from consumers and that puts them in charge of how much your streaming bill will be every month. Cable may be going away, but the reason we don't like cable companies probably won't.
Motley Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Netflix and Walt Disney. Try any of our Foolish newsletter services free for 30 days. Check out The Motley Fool's one great stock to buy for 2015 and beyond.
