Apple and Netflix killed the Cable Company

For two weeks now, we have been experimenting with “the future” and I think we’ve now signed on for the long haul. In the future, entertainment will have nothing to do with single source programming providers (i.e. Cable or Satellite companies) that charge a TON for a ton of stuff nobody watches. A la carte consumption models will rule the day. Cable companies toy with this via “On Demand” but there’s no universal on demand model today that doesn’t come saddled with the traditional model and it’s traditional costs.

“That paragraph was ridiculously geek-filled and made no sense” you say? Let me break it down.

Dish Network has sold me the Extended Choice package, the HDTV channels add on package, two HD receivers that can feed TV to four televisions, and a DVR so I can record what I want to watch and watch it when I want to watch it. I will be up front, this cost me $139.79 a month including taxes and fees. I didn’t even pay for “premium” channels like HBO or Showtime or Cinimax, and I was totaling out at $1,677.48 a year.

I also pay $20 a month for a Netflix subscription, and $120 for a one year MLB.tv subscription so I can watch my Mariners from here in Atlanta; but those costs are above and beyond my “satellite” bill.

OS and I talked at length about what we ACTUALLY watched on satellite. We came up with ten shows:

  1. Doctor Who
  2. Castle
  3. The Big Bang Theory
  4. How I Met Your Mother
  5. Glee
  6. The Biggest Loser
  7. Royal Pains
  8. The Late Late Show with Craig Ferguson
  9. “Pony Stuff” on RFDtv
  10. Top Gear (BBC America)

Beyond this, I also watched every Chelsea FC match that showed on Fox Soccer Channel or one of the ESPNs, and football when I remembered to care (I’m a Seahawks fan…it can be hard to watch sometimes).

We get 99% of our news from npr.org and cnn.com and we get our weather from weather.com (and NOAA when the wind and lightning get a bit uppity).

So let’s break that down, that’s about ten hours a week, or forty hours a month; which works out to almost exactly $3.50 an hour ($139.79 / 40 = $3.49475). Three-and-a-half bucks really isn’t that bad a deal.

In fact, it’s below the media marketing “magic number” of $5 an hour. Don’t know the magic number? Do the math. Ever paid to see a movie? did you pay more than $5 an hour ($8 for a 90 minute flick)? Did it annoy you? If the ticket had been just a little lower would you have felt ok about it? That’s the magic number. Redbox is king of the Magic Number. Netflix is king of the Magic Number. MatinĂ©e movies are king of the Magic Number. Ever wonder why video games cost $60 bucks for a twelve hour experience on your XBox, but an iPhone app cost $2.99? The Magic Number. You instinctively know how much time you’ll actually spend playing an app – it’s about 45 minutes. Sure, some apps are great (Angry Birds) and return a ridiculous amount above the magic number…but those are the games that sell a bazillion copies over time.

Break down your own TV bill. If it’s working out to less than $5 an hour (even if you NEVER did the math before) you’ll find out you don’t mind. If you watch few enough hours that it goes above $5 an hour, you probably already got rid of your service…again, even if you never did the math.

And make no mistake, the service is designed to get you to watch more TV and lower the per-hour cost (“addiction retention” isn’t just for cigarettes). Ever wonder why TV channels run as many ads for their own shows as they do for product advertising? Lowering the PHC by increasing hours viewed returns as much money as Ford pays to show off computer generated trucks while Mike Rowe gives a voiceover.

Reality TV (both the HGTV kind and the “people behaving badly” kind) were watersheds for expanding viewing hours. No one wants to look away from a trainwreck or a remodel (or a trainwreck of a remodel for that matter). Did you ever wonder why Animal Planet stopped doing shows about animals and started doing them about people who rescue dogs or monkeys or stray cats from horders? Retention hours. Wonder why Discovery Channel and History Channel do less about science and history and more about stuff that looks like it escaped from the pages of the Weekly World News (Asteroids Hit the Earth! People Die in Mysterious Event! Nostradamus Predicts the Impending Apocalypse! UFOs Built the Pyramids!)? Retention hours.

I’m not gonna lie, it worked on me. It worked on me for too long.

Then we moved here, and something happened. We started watching less and less Satellite programming and more and more Netflix. I started watching my Mariners games on my iPad, and my soccer on ESPN3 on my XBox360.

Our per-month hours on the Satellite dropped to about 10 total. We were never getting through the DVR, and we found ourselves tuning out of Biggest Loser half-way through.

At ten hours our Per Hour cost was exceeding $16. That’s WAY over the Magic Number. Whereas our Netflix hours were somewhere in the 20-30 a month range, and our PHC was under a buck.

ESPN3 is free with my AT&T internet bill…so no cost there…

And I paid $120 for season’s worth of Mariner’s games and I’ve already seen ten (at an average of 3 hours each) for a net cost in the first month of $4 an hour. By the end of the season my net cost on MLB.tv will be under fifty cents an hour.

So, let’s talk about what we’d “lose” if we gave up Satellite. Well, of the ten shows we listed, only Five are “near and dear” to our hearts: Doctor Who, Castle, BBT, HIMYM and Glee.

Of those, we can watch four of them on Hulu the same week at no cost, or rent the show from iTunes for a buck. Doctor Who is more complicated, as there’s no rebroadcast, so we decided to get an iTunes Season Pass for $20.

Like my Soccer on FSN, the Pony Stuff is gonna be a web only kind of deal for a while. It’s a sacrifice that each of us is willing to make.

So…basically we’re talking $20 to replace $1677.48 out of the budget. Even if I buy an AppleTV for the main TV (so I don’t have to haul my laptop over and hook up to the HDMI) I’m only out another $99. That’s still less than a tenth of the old cost.

The other advantage is that it’s one less thing designed to keep me sitting on my ass. I pay for and acquire what I WANT to watch, without being sucked into the other things that come after. I need all the help I can get to get off my ass.

Saving $1500 a year doesn’t hurt either.

This week we send back our Dish equipment and put up an HD Antenna (to get local stations if possible). Yes, it kinda freaked me out, but the benefits outweigh the sacrifices. Without Apple iTunes and Netflix and ESPN3 and MLB.tv and Hulu I wouldn’t have the willingness to do this. But the a la carte model of getting what you want when you want it, and not paying for everything you don’t when you don’t…that model will kill the cable companies and satellite providers. Maybe not today, but by 2020 entertainment will come to our 3D TVs and our iPad 4s when we want it and only what we want.

And if today is any indication, it’s gonna save a lot of money.

[Word Count: 1275]

2 thoughts on “Apple and Netflix killed the Cable Company

  1. If we could have simply paid for the 5 measly channels we actually watched, I’m sure we would have kept the tv. But, for the 250+ channels available, we’d have paid about $3.00 a month, or roughly $0.60 a channel if we could have just picked and chosen the exact channels we wanted.

  2. Very nice analysis says the current accountant, former marketing major, and satisfied cable-dropper!

    Thanks! As a guy who works in finance consulting, it did feel a bit like a “work exercise,” but in a good way.

    I’m a big fan of Hulu, TV shows on DVD from the library, and TV shows on DVD as Christmas presents from my parents. I’m currently on the last season of Ally McBeal thanks to my parents…can’t believe I never watched that one when it was on.

    I have to say that the NetFlix instant watch feature is a life saver. We use the heck out of that. The NetFlix DVDs sit around for weeks, but we watch hours of instant queue things every month. I can’t recommend the service highly enough.

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