Sunday, January 23, 2011
Cutting the (television) cord
People are using technology to make their own TV programming choices.
Samuel Lafaye's Apple TV box.
DON PETERSEN Special to The Roanoke Times
As an alternative to cable, Sam Lafaye now streams movies, TV shows, music and photos to his TV, via his computer and an Apple TV box. He also watches some programs on an iPad.
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Two years ago, Sam Lafaye grew frustrated with cable television. So the Roanoker started poking around on a geek-it-yourself website called lifehacker.com. There he learned about what's come to be called cord-cutting.
The cord is the one that connects thousands of customers in the region and 100 million across the United States to their cable television or telecom company or satellite dish. The cut is the idea that individuals can make their own programming choices using a high-speed Internet connection, a device linked wirelessly to the Net and a streaming movie or TV service, such as the ones offered by Apple, Google and Netflix.
In Lafaye's case, he first started watching shows on his computer via Hulu, a website that offers free and paid access to recent TV programs and movies. He dropped his cable subscription in July 2009.
In November, the 51-year-old retired Marine and current employee of the Veterans Affairs Medical Center in Salem bought an Apple TV device at a one-time cost of $99 to stream shows from his Internet connection to his Samsung TV. Now he pays $9 a month to stream movies from Netflix and buys other shows a la carte from Apple's iTunes store, usually at 99 cents each. He used to pay $52 a month for cable television.
"No commercials. That's a great thing. And the second thing is you save money," Lafaye said.
He has a DSL Internet connection through Verizon and it comes with a subscription to ESPN3, so he can watch some sports on his computer. When a game's on that he can't get online or that he wants to watch on a large-screen television, he walks to a neighborhood restaurant -- Community Inn, Village Grill or All Sports Cafe -- to watch it.
Since November, there's been an ongoing debate among analysts, technology bloggers and leaders in the industry over whether cord-cutting is a coming trend, or just an economy-related blip.
Third-quarter results from publicly traded cable companies, including the largest, Comcast, accelerated the debate. Analysts with SNL Kagan reported in November that U.S. cable companies lost nearly 750,000 basic video subscribers in the third quarter, the largest dip since it began tracking the industry 30 years ago. Gains in satellite and telecommunications-company TV subscriptions left a net loss of 119,000 video subscribers nationally. Still, that's only about 0.1 percent of the people who subscribe to TV via cable, satellite or telecom companies, 60 percent of whom subscribe to cable.
Further number-crunching by The Wall Street Journal of SNL Kagan and MediaBiz data found that between the first and second quarters the 10 largest media markets saw the number of television subscribers grow, while the rest of the country lost subscribers. The Roanoke-Lynchburg market, the 67th in the country, saw a 0.6 percent decline.
Ian Olgeirson, an SNL Kagan senior analyst based in Denver, said multichannel service providers have spoken in a fairly unified voice that economic factors such as high unemployment and low housing formation have had a far greater influence on the decline in subscriber numbers than customers seeking alternative means to get their TV, which the firm calls "over-the-top substitution."
"We don't like to use the term cord-cutting," he said, because that leaves out people who never subscribed to TV in the first place, for instance, recent graduates used to streaming all of their content from the Internet. As fourth-quarter results emerge in the next month, the firm will continue to track the trend, which he acknowledged is "difficult to count, difficult to quantify."
Cox's quiet response
The nation's third-largest cable company, Cox Communications, which provides cable, broadband and telephone service in the Roanoke Valley, is privately held and doesn't disclose subscriber data. But research and consulting firm MediaBiz, using historical data it has compiled, along with recently acquired data from copyright filings, estimates that Cox lost 2.58 percent of its video subscribers over the six months ending Sept. 30, compared with a 2.3 percent loss for Comcast.
Cox spokeswoman Felicia Blow, while not commenting on whether video subscriptions are down, said Cox, with 54,000 basic cable subscribers in Roanoke, is responding to consumers' interest in mobility and portability by testing a new online component for television subscribers.
Cox quietly launched a beta test of the new Cox TV Online on Dec. 16, according to Kim Stanley, vice president of operations in Roanoke. Internet and TV customers who go online to www.cox.com/TV can access hundreds of free television programs and many fee-based shows and movies, through the EPIX online movie channel, through Vutopia, a Netflix-like movie-on-demand service, and HBO GO.
Some Cox customers like streaming video, Stanley said, and this new service responds to that but does so within the company's "bundle" of TV, high-speed Internet and telephone.
The new Cox TV Online service offers a significant increase in the volume of content that's available, including a much larger selection of movies, said Hobie Ritzel, a senior marketing product manager with Cox. Besides, "It's available when you want to watch it," he said.
Comcast's strategy
Comcast, which sells cable service in Salem and parts of Roanoke County, along with the Blacksburg-Christiansburg area, has responded with a stepped-up video-on-demand product of its own. Last week it won government approvals of its acquisition of a controlling stake in NBC Universal. That deal will make Comcast, already the nation's largest cable company by subscribers, both a significant distributor and major producer of content.
Earlier this month, Comcast Chairman and CEO Brian Roberts announced plans to stream content on demand through a new iPad and Android tablet app called Xfinity TV. In a Citigroup investors conference call Jan. 5, Roberts said the company saw improving customer growth trends in the fourth quarter that he thinks "shows that the impact of the digital transition is now behind us."
Roberts specifically addressed the issue of cord-cutting as a matter of technological change.
"I think media companies are all trying to figure it out, each for their own strategy," he said. "We are comfortable that the business is still growing and robust in the subscription business. There's lots of ways to access video, and what's critical for us is to use that to spur new innovation."
The company, with about 800,000 subscribers in Virginia, does not disclose local subscriber numbers for competitive reasons, a Comcast spokeswoman said.
In the marketplace
Dwayne Martin owns a Roanoke business called Sound Decision that specializes in high-end, custom installations of stereos, televisions and other home electronics. Martin said streaming TV has taken off in the past year, and many of his customers are watching movies through services such as Netflix or Vudu, linked to a high-definition television through a streaming video device such as Apple TV, Blu-Ray players or video game systems.
He's seen no interest from customers in dropping cable or satellite service. Instead, he sees customers dropping the premium channels from their subscriptions and getting those movies and shows from other sources. That's another disputed trend that industry insiders call "cord-shaving."
Indeed, there are distinct disadvantages to cutting the cord. For one, live sports are virtually unattainable online, unless you have a subscription to ESPN3. Live local news is likewise out without a separate digital TV antenna, though you can play video stories after the fact from most broadcast TV and cable news websites with ease. Same-day network programming is harder to come by, as is live national news.
For the less technologically inclined, there's the issue of learning to connect and operate yet another electronic box, and a dynamic of having to more actively seek out the programs you want, rather than passively receiving them through programmed television.
Finally, there's the issue of Internet access. Streaming TV doesn't work without reliable, high-speed Internet service. Cable operators saw continued growth in high-speed Internet subscriptions through the third quarter. There's been some speculation in the industry that eventually those operators might make up for lost TV subscriptions by charging more for greater bandwidth access used to stream movies and other programming.
Cord-cutting lifestyle
Still, for some, the urge to unplug may be as much an exercise in deliberate living as a reflection of a new technology.
Shelly Maycock reached that point when she moved back to the New River Valley four years ago from North Carolina.
"I just decided that I would be better off reading more for my profession at least, and doing more volunteer work," said Maycock, an English instructor at Virginia Tech.
Cost also was a factor.
"I just don't like paying for all that. There's so much that I wouldn't watch," she said.
Maycock said she spends about $50 a month: $35 for a wireless Internet connection and about $15 for a Netflix subscription. She also bought a digital converter to receive the broadcast stations in the region, though reception for Blue Ridge Public Television is sketchy at times and nonexistent for Lynchburg-based ABC affiliate WSET.
In the Roanoke Valley, Sandra Collins said her decision to drop cable TV in late 2008 hinged on cost.
"It seemed like a lot of money to pay for something I so seldom utilized," she said.
So she did some research, experimented with Hulu and YouTube, and started streaming movies from Netflix. Later, her Windows-based computer crashed and she switched to a Linux operating system that wasn't as compatible with streaming Netflix. Now she streams some shows and news programming to her laptop and uses a DVD player to watch movies. Her next laptop will be a fully equipped Mac.
Still, she works full time as a nurse manager and doesn't spend a lot of time watching TV.
"Technology is a great tool you can really use to enhance and simplify your life," Collins said. "It can also run your life if you let it."
