HBO and CBS rattled the industry by launching new online video services that cater to customers fed up with expensive cable bills. This new model could slash the few remaining tethers holding back many would-be cord cutters.
Q: How will it work?
Starting next year, fans of “Game of Thrones,” “True Detective,” and “Veep” will no longer need a cable subscription to watch these HBO shows. Customers may pay a monthly fee for online access to new and old episodes anytime, on demand. But unlike Netflix, which collects shows and movies from many different sources, the HBO and CBS services will offer episodes from only their respective companies.
For example, CBS All Access will charge $5.99 a month for 6,500 episodes from current CBS prime-time series, previous seasons, and older shows. It will also toss in live feeds from 14 local CBS affiliates.
HBO has yet to discuss specifics, but its upcoming plan will likely copy HBO Nordic, an online-only subscription plan available in four northern European countries. That service offers full seasons of popular shows, including new episodes just hours after they air, available to watch on computers, phones, tablets, and TVs.
“This will be transformative for our company,” said HBO chief executive officer Richard Plepler in announcing the new plan. “It is time to remove all barriers to those who want HBO.”
Q: Will other networks or studios follow suit?
Some already have. Just days after the HBO and CBS announcements, Lionsgate and Tribeca Enterprises revealed their own joint venture for movies. But this plan, called Tribeca Short List, looks more like previous online efforts, in which companies joined together instead of starting brand-specific services.
Rather than go it alone, ABC, Fox, and NBC teamed up in 2007 to launch Hulu, a streaming video service with more than 6 million paid subscribers. The big networks figured people were more likely to spend $7.99 a month for 100,000-plus TV episodes and movies than to sign up for shows from only one network.
NBCUniversal chief executive officer Stephen Burke admitted in an investor call that he was surprised by the HBO and CBS announcements. Until now, both companies had clung tightly to the status quo. With HBO in particular, “I think it’s going to be such a challenge for them to not cannibalize what is already a really, really good business,” says Mr. Burke.
But if this new style of subscription service takes off, many more networks could go rogue.
Q: Is this a good deal for customers?
It depends. These a la carte subscriptions could unravel the traditional cable business. Instead of paying a large sum of money each month for tons of cable channels, some of which you might never watch, a la carte customers would pay for only the stations they want.
While ostensibly fairer, this pick-and-choose plan could wind up costing customers more money than the current system. Each service will need to cover the cost of marketing, customer service, and enough online bandwidth to send out all that digital video without any hiccups. Online ads generally earn less money than TV spots – and, most likely, fewer people will be watching them. These added costs will make individual channels more expensive to run.
If you can decide on only two or three stations, living a la carte will save your family a lot of money. But at $6 a month per channel, costs can pile up quickly. Gobbling up all this extra online video could also inflate your monthly Internet bill.
Q: Will cable companies fight back somehow?
Cable companies aren’t too scared. While many people think of canceling TV service as “cutting the cord,” families will still need Internet access to enjoy these new online services. In many parts of the United States, the fastest option for broadband Internet comes from cable companies.
Comcast, the largest US cable provider, lost 155,000 pay-TV customers over the past 12 months. During the same period, the company gained more than a million Internet subscribers.
Q: What a la carte services are available right now?
Sports fans have lots of choices. Professional baseball, football, hockey, basketball, and wrestling each have their own paid streaming services, but prices vary wildly. (The National Basketball Association, for example, charges consumers based on how many teams they want to follow. Major League Baseball requires a separate service for postseason games.) In general, you can expect to pay $130 to $300 per season.
VEVO has taken up the old MTV mantle with unlimited access to modern and classic music videos. Twitch broadcasts experts and online celebrities playing video games. Both niche services are free of charge.
And, of course, the three heavyweights are Netflix, Hulu, and Amazon Prime, each with original series and massive archives of shows and movies.