Tag Archives: HBO

Is AT&T the 800-pound Gorilla?

For years it’s been understood in the industry that Comcast is the hardest incumbent to compete against. However, they are still a cable company and many people dislike cable companies – but Comcast has been the most formidable competitor. The company is reported to have the highest gross margins on cable TV and might be one of the few companies still making a significant profit on cable. Much of that is due to their extensive programming holdings – it’s easier to make money on cable when you buy your own programming. Comcast has also been the best in the industry in creating bundles to lock in customers – bundling things like smart home and more recently cellular service.

But the new 800-pound Gorilla in the industry might be AT&T. The company seems to be finally shaking out of the transition period from integrating their purchase of Time Warner. It can be argued that the programming that came from that merger – things like HBO, CNN, and blockbuster movies – will make AT&T a more formidable competitor than Comcast.

AT&T will be launching its new streaming service, AT&T TV, next month. The company already has one of the largest streaming services with DirecTV Now. It’s been rumored that the streaming service will start at a price around $18 per month – an amazingly low price considering that HBO retails for $15 online today. The company is trying to coax more money out of the millions of current HBO subscribers. This pricing also will lure customers to drop HBO bought from cable companies and instead purchase it online.

AT&T has also been building fiber for the last four years and says that they now pass 20 million homes and businesses. They recently announced the end of the big fiber push and will likely now concentrate on selling to customers in that big footprint. The company is one of the more aggressive marketers and has sent somebody to my door several times in the last year. That’s a sign of a company that is working hard to gain broadband subscribers.

The one area where AT&T is still missing the boat is in not bundling broadband and cellular service. AT&T is still number one in the country with cellular customers, with almost 160 million customers at the end of the recently ended second quarter. For some reason, they have never tried to create bundles into that large customer base.

AT&T has most recently been having a customer purge at DirecTV. For years that business bought market share by offering low-prices significantly below landline cable TV. Over the last, year the company has been refusing to renew promotional pricing deals and is willing to let customers walk. In the first quarter of this year alone the company lost nearly one million customers. The company says they are not unhappy to see these customers leave since they weren’t contributing to the bottom line. This is a sign of a company that is strengthening its position by stripping away the cost of dealing with unprofitable customers.

AT&T has also pushed a few net neutrality issues further than other incumbents. As a whole, the industry seems to be keeping a low profile with issues that are identified as net neutrality violations. There is speculation that the industry doesn’t want to stir up public ire on the topic and invite a regulatory backlash if there is a change in administration.

AT&T widely advertised to its cellular customers earlier this year that the company would not count DirecTV Now usage against cellular or landline data caps. The same will likely be true for AT&T TV. Favoring one’s own service over the competition is clearly one of the things that net neutrality was intended to stop. Since there are data caps on both cellular and AT&T landline products, the move puts Netflix and other streaming services at a competitive disadvantage. That disadvantage will grow over time as more landline customers hit the AT&T data caps.

AT&T has made big mistakes in the past. For instance, they poured a fortune into promoting 50 Gbps DSL instead of pushing for fiber a decade sooner. They launched their cable TV product just as that market peaked. The company seemed to lose sight of all landline and fiber-based products for a decade when everything the company did was for cellular – I remember a decade ago having trouble even finding mention of the broadband business in the AT&T annual report.

We’ll have to wait a few years to see if a company like AT&T can reinvent itself as a media giant. For now, it looks like they are making all of the right moves to take advantage of their huge resources. But the company is still managed by the same folks who were managing it a decade ago, so we’ll have to see if they can change enough to make a difference.

Reality Pricing Coming for Online Video

I’ve been a cord cutter for many years and over the last few years, I’ve tried the various vMVPDs that offer channel line-ups that somewhat mimic traditional cable TV. I’ve tried Sling TV, DirecTV Now and Playstation Vue. In every case I’ve always scratched my head wondering how these products could offer prices that are lower than the wholesale price of the content from programmers. There are only two possibilities – either these companies have been setting low prices to gain market share or they had been able to negotiate far better deals for content than the rest of the industry.

Of course, the answer is that they’ve been subsidizing these products. And Wall Street is now pressuring these companies to end the subsidies and become profitable. There is probably no better example of this than AT&T’s DirecTV Now service. When DirecTV Now launched it carried a price tag of $35 per month for about a hundred channels of programming. The low price was clearly set as a reaction to a similarly low price from Sling TV which was the first big successful vMVPD.

Both companies offered line-ups including the channels that most households watch. This included the high-price programming from ESPN and numerous other quality networks. The initial pricing was crazy – a similar package on traditional cable was priced at $60 – $70.

The low pricing has worked for DirectTV Now. They are getting close to surpassing the Sling TV in subscribers. AT&T has featured DirecTV Now in its advertising and has been shuttling customers from the satellite-based DirecTV to the online product.

But AT&T company just got realistic with the product. They have collapsed from four options down to two options now priced at $50 and $70 per month. The company got ready for this shift by eliminating special promotional prices in the fourth quarter of last year. They had roughly half a million customers who were paying even less than their published low prices. When AT&T raised the rates they immediately lost over half of those promotional customers.

Not only are prices rising, but the company has significantly trimmed the channel counts. The new $50 package will have only about 40 channels while the $70 package will have 50 channels. It’s worth noting that both packages now include HBO, which is the flagship AT&T product. HBO is by far the most expensive programming in the industry and AT&T has now reconfigured DirecTV Now to be HBO plus other premium channels.

The new prices are realistic and also include a profit margin. It will be interesting to see how the DirecTV Now customer base reacts to such a drastic change. I’m sure many of them will flee to cheaper alternatives. But the company may also attract customers that subscribe directly to HBO to upgrade.

The big question is if there will be cheaper alternatives? The online industry has been around long enough that it is now out of its infancy and investors are starting to expect profits from any company in this space. The new realistic pricing by AT&T is likely to drive the other online programmers to also get more realistic.

These price increases have ramifications for cord-cutting. It’s been easy to justify cutting the cord when you could ditch a $70 per month traditional cable product for a $35 online one that has the channels you most watch. But there is less allure from going online when the alternative choice is just as expensive as the traditional one. There is always going to be some savings from jumping online – if nothing else customers can escape the exorbitant fees for renting a settop box.

It’s clear that AT&T is counting on HBO as the allure for its online offering. That product is available in a number of places on the web for a monthly rate of $15, so including that in the $50 and $70 product still distinguishes DirecTV Now from the other vMVPD providers.

What is clear by this move is that we are approaching the time when companies are willing to eat huge losses to gain online market share. That market share is worthless if customers leave in droves when there is a rate increase. These big companies don’t seem to have fully grasped that there is zero customer loyalty online. Viewers don’t really care who the underlying company is that is carrying their favorite programming – it’s the content they care about. The big cable companies have to break their long history of making decisions like near-monopolies.

The OTT Super-bundler

Without making much noise about it, Amazon has become a super-bundler of OTT content. In addition to their own unique programming Amazon now carries programming from over 90 different channel partners. This creates some really interesting dynamics in the industry.

What makes Amazon a wildcard in the OTT business is that nobody knows how many Prime video customers they have. The growth of the Prime service has been explosive, but that service provides free shipping on Amazon with an annual $99 fee and Amazon doesn’t report how many of those members watch Amazon video. Industry analysts have estimated that there were 45 million Prime customers in 2015, 65 million in 2017 and probably 80 million by the end of this year. That huge overall customer base has the potential to turn Amazon into a bigger video provider than even Netflix, but unless the company begins disclosing video customers we may never know.

We do get some idea of Amazon’s market strength through its impact on channel partners. Recently BTIG analyst Rich Greenfield reported that Amazon is responsible for over half of the online sales of HBO, and almost all of the online content sold by Showtime and Starz.

That creates an interesting dilemma for HBO. The company directly markets its online product at $15 – the same price that is being marketed on Amazon. HBO has enough strength as a programmer that they also charge about the same cost to service providers on cable or fiber systems. But there is no doubt that Amazon extracts a fee for selling the service, and so HBO will make a smaller margin on an Amazon sale than through its other sales channels. This means that every time a customer cuts the cord on cable and instead comes to HBO through Amazon that the company loses margin. This is not likely to hurt HBO much and they are better off retaining customers – but Amazon profits significantly on selling HBO and other services due to its sheer market power and number of subscribers.

But HBO and the other programmers lose something more important than just a little margin – they lose a direct relationship with a customer. Amazon knows the customer, bills the customer, and also knows the customer’s preferences for watching video of various types. This knowledge has to be invaluable to Amazon.

The list of OTT providers on Amazon is impressive and it represents almost every OTT provider that is not owned by a big ISP. In addition to the premium movie services, Amazon carries just about every OTT provider you ever heard of – and many that you have not. Just to throw out a few names, Amazon carriers Fullscreen, Fandor, Curiosity Stream, Gaia, PBS Kids, Shudder, Motorvision.TV, Mubi, the Daily Burn, Heera, Acorn TV and many others.

A number of these OTT providers only sell through Amazon, so you won’t find them anywhere else on the web. Pretty much anybody that can gather together a pile of content can gain significant subscribers through the Amazon platform.

The way that Amazon markets these providers is interesting. If you are an Amazon Prime customer you can see the full list of its channel partners by searching for ‘Amazon Channels’. But Amazon doesn’t directly market any of the channels as a service, but instead only offers you the channel content based upon your search for content. If you want to watch a horror movie then your search results will include Amazon’s own content as well as content from the many channel partners. You may be offered content from Shudder, Screambox, Full Moon or XLTV without even realizing it. Somewhere in that search you will also be offered a subscription to these various horror channels.

It’s easy to think that we are seeing the growth of a vibrant OTT industry. But when you look a little deeper we are not. The industry really consists of Netflix and its huge pile of unique content, Hulu which is owned by the cable companies, a handful of resellers of standard cable channels like SlingTV, and Amazon Prime. Many of the channels on Amazon Prime offer direct subscriptions, but it turns out that almost all of their sales come through the Amazon platform and not directly through web subscribers. I find it interesting that a lot of the channels carried by Amazon offer a free 30-day trial to anybody directly on the web, but when purchased through Amazon customers always pay up front and are not offered the free trial. For many of the smaller providers 30 days is long enough to watch all of their content you care to see – but Amazon has instead monetized the interest in the content.

This makes a lot of sense for a content owner. They need virtually no advertising budget because the huge number of Amazon Prime customers can find their content by genre. And they don’t need to work through the issues of developing the physical network infrastructure necessary to provide web programming – that all gets handled by Amazon. But these channel owners also lose a lot. They don’t know their customers. In many cases people watch their content without even realizing that they are the content owners. But I guess the lure of selling to 80 million potential customers outweighs these concerns. It’s certainly a great deal for Amazon because they are gathering enough content to satisfy almost any potential video customer – without having to develop the content.

The Myth of OTT Savings

One of the reasons touted in the press for the recent popularity of cord cutting is the desire of people to save money over a traditional cable TV subscription. But as I look at what’s popular on the web I wonder if the savings are really going to be there for people who like to watch a variety of the best content.

There has been an explosion of companies that are pursuing unique video content, and this means that great content can now be found at many different places on the web. Interestingly, most of this great content is not available on traditional TV, other than the content provided by the premium movie channels. But considering the following web platforms that are creating unique content:

  • Netflix. They are the obvious king of unique content and release new shows, specials, movies and documentaries seemingly weekly. And they seem to have a wide variety of content aimed at all demographics.
  • Hulu. They are a bit late to the game. But the newly released The Handmaid’s Tale is getting critical acclaim and will be part of a quickly growing portfolio of unique content.
  • HBO. HBO has always had a few highly popular series with Game of Thrones still drawing huge audiences.
  • CBS All-Access. CBS has made a bold move by offering the new series Star Trek: Discovery only online. It’s bound to draw a lot of customers to the online service.
  • Amazon Prime. The company says they are going to invest billions in unique programming and are aiming at overtaking Netflix. Their recent hit The Man in the High Castle is evidence of the quality programming they are pursuing.
  • Showtime. They have historically created limited amounts of unique content but are now also looking to create a lot more. Their new show Twin Peaks has come out with high reviews.
  • Starz. This network is also now chasing new content and has a hit series with American Gods.
  • Seeso. Even services that most people have never heard of, such as Seeso are creating popular content such as the comedy series My Brother, My Brother and Me.
  • YouTube Red. The industry leader of unique content is YouTube which has allowed anybody to create content. While most of this is still free, the platform is now putting a lot of great content such as the comedy Rhett and Link’s Buddy System behind a paywall.

Subscribing to the above online services with the minimum subscriptions costs $79 per month (and that’s without figuring in the annual cost of Amazon Prime, which most people buy because of the free shipping from Amazon). The above line-up doesn’t include any sports and you’d have to buy a $30 subscription from Sling TV to watch ESPN and a few other popular sports networks. ESPN recently announced that they still don’t have any plans to launch a standalone web product but are instead pursuing being included in the various skinny bundles.

Not considered, though, in the above list are numerous other less-known paid OTT subscriptions available on line. As listed in this recent blog there are dozens of other platforms for people who like specialized content like Japanese anime or British comedies.

Of course, one thing the above list shows is that there is a world of content these days that is not being created by the major networks or the traditional cable networks. There is likely more money pouring into the creation of content outside of the traditional networks.

So OTT doesn’t seem to save as much as hoped for people that wish to enjoy a variety of popular content across different providers.  But there are other benefits driving people to OTT programming.  One of the great benefits of OTT programming is the ability to subscribe and cancel services at will. I have been trying various OTT networks and it’s really tempting to subscribe to each for a month or two until you’ve seen what you want and then move on to something else. I’m starting to think that’s the way I will use these services as long as they continue to allow easy egress and exit.

And OTT programming allows for non-linear TV watching.  As long as somebody lives near to a metropolitan area a cord cutter can still view the traditional network channels using rabbit ears. But what a lot of cord cutters are finding is that they quickly lose their tolerance of linear programming. I know that when I travel and have TV available in the room that I only watch it if I want to catch a football or basketball game. I can no longer tolerate the commercial breaks or the inability to pause linear TV while I want to do something else. And that, perhaps more than anything, is what will bring down traditional cable TV. As much as cable companies tout TV Everywhere, their basic product is still showing content linearly at fixed times. There is such a huge volume of great OTT content available any time on any device that it’s not hard for somebody to walk away from the traditional networks and still always have something you want to watch.

Erosion of Cable Subscribers

Old TVA lot has been written about the impact of cord cutting and there are varying estimates about how significant the phenomenon has become. But there is a different way to examine the effects on the cable industry, which is to count the number of US homes that are paying to subscribe to each cable channel.

Below I am comparing the numbers of subscribers from August 2013 to the same subscriber counts today for some of the more popular channels. It’s easy to see that almost across the board networks have lost a lot of customers. I chose August 2013 because somewhere around that date was the peak of the cable industry in terms of customers. Since then total customers (and also customers for each network) have dropped.

These drops can’t all be attributed to cord cutting – cord shaving (where customers downsize their cable packages) is also a factor in these drops. Some cable systems are also working hard to cut back on the number of channels they carry. To put this chart into perspective, there are currently about 136 million housing units in the US.

In (000)
Network August 2013 Current Change
Weather Channel 99,926 84,683 (15,243)
ESPN 97,736 87,859 (9,877)
Travel Channel 94,418 84,862 (9,556)
MTV 97,654 88,137 (9,517)
Nickelodeon 98,799 89,663 (9,136)
VH1 96,786 88,085 (8,701)
TV Land 96,282 87,901 (8,381)
Comedy Central 97,838 89,857 (7,981)
A&E 98,302 90,478 (7,824)
SYFY 97,447 89,854 (7,593)
TNT 98,139 90,586 (7,553)
CNN 99,292 91,794 (7,498)
Discovery Channel 98,891 91,829 (7,062)
HGTV 98,229 91,169 (7,060)
AMC 97,699 90,767 (6,932)
FX 97,157 90,389 (6,768)
E! Entertainment 96,472 89,887 (6,585)
Disney Channel 98,142 91,611 (6,531)
Bravo 94,129 87,620 (6,509)
Food Network 99,283 93,062 (6,221)
MSNBC 94,519 89,764 (4,755)
Oxygen 78,208 75,651 (2,557)
NFL Network 70,910 71,252 342
Showtime 28,094 29,014 920
HBO 32,445 34,369 1,924
Hallmark Channel 85,897 88,885 2,988
National Geographic 84,446 89,865 5,419

These numbers tell a different story than articles about cord cutting. Industry estimates of cord cutting during this same time frame vary between 2.5 and 4 million homes that have dropped cable altogether. But these figures show that most major networks have lost between 6 and 10 million paying subscribers in a little under three and a half years.

Obviously not every network is experiencing the same changes. For example, the 15 million households lost by The Weather Channel are due to many cable systems changing to a cheaper alternative. And you can see at the bottom of the chart that there are still networks that are growing. These networks are gaining customers by attracting more subscriptions, like the premium movie channels, or by getting added to additional cable systems that didn’t carry them in 2013.

But overall this is a sobering chart, and one that all of the programmers are well aware of. The various factors of cord cutting, cord shaving, and of cable companies trying to cut back their channels are all steadily eroding the number of households that get to watch the various networks.

AT&T and Time Warner

ATTI have been thinking about the AT&T and Time Warner merger since it was first announced. Generally the reasons for megamergers are apparent – there is generally some big efficiency or cross benefit to both companies that makes sense. But I had a very hard time seeing very much benefit to either company with this merger.

The obvious intersection between the two companies is programming. Time Warner produces a lot of content – networks including HBO, TNT, TBS, CNN and a host of smaller networks.  And AT&T has a lot of cable customers through DirecTV and U-verse.

But as I think through the programming advantage it’s not as big as you might think. AT&T is not likely to buy any more cable content from Time Warner after a merger than it does today. It’s likely that all of Time Warner’s content is already delivered to AT&T’s video customers. In fact, once the two companies combine, any transactions between the two of them disappear upon consolidation when creating the financial statements for the combined companies.

The non-accountant will say, “Wait, doesn’t that mean that AT&T gets the content for free”? And the answer is no, because it also means that the revenue that AT&T pays to Time Warner today in real cash also disappears. On the consolidated books both sides of the transaction disappear, as if they never happened.

And it’s hard to see any of the typical merger savings from consolidating management. The two businesses have almost nothing in common and it would make no sense for program executives to run a giant ISP or for AT&T executives to make programming decisions.

The only other obvious benefit is for AT&T to somehow leverage the Time Warner content to grow the wireless business. When the merger announcement was first announced the FCC sent a letter to AT&T and told them they would be investigating their zero-ratings practices. Zero-rating is when an ISP provides content to customers without counting the usage against any data caps. AT&T already does this today with a limited amount of content, but if they owned Time Warner they would have far more content they could send over cellphones that wouldn’t count against data caps. An AT&T customer could watch Game of Thrones, for instance, on their AT&T cellular plan without worrying about their monthly data cap. But if they watch non-AT&T video they would be penalized.

With the new administration it looks like zero-rating (and net neutrality in general) is likely dead. But how much of a benefit is zero-rating to a wireless company? Certainly this could drive more advertising revenue to the combined company, but that doesn’t seem like a big enough motivation for the mega-merger. And unless one cellular companies gets killer content that everybody wants to watch on a cellphone, it’s hard to think that zero-rating is going to be a big game changer in terms of shifting wireless customers between providers. I have a hard time seeing AT&T zero-rating as a Verizon Wireless killer.

The only real benefit I can foresee is a bit of a scary one. With each of these mergers between ISPs and programmers the industry collapses to fewer and fewer major players. This merger would put AT&T on the same footing as Comcast in terms of programming content. And maybe that is the major reason for the merger – just keeping up.

But what is to stop the biggest companies from selling content to each other in bulk? I could foresee AT&T and Comcast agreeing to sell content to each other at a reduced price based upon some volume discount. This would end up giving both companies an edge over every other ISP. These two mega-companies (and probably a few others) would then be able to leverage that advantage to crush their other competitors – leaving the nation with even fewer competitors than today.

I don’t know that this scenario could be sustained. It seems like the public is migrating away from a lot of traditional content towards programming produced independently by companies like Netflix. But if the AT&T / Time Warner merger is allowed to happen, what will stop one of these big companies from buying Netflix and every other independent content provider that pops up?

Some Tiny Steps for Web TV

Rabbit_Ears)There were several announcements in the last week from programmers who are going to put their content onto the Internet. I’ve had several people ask me if they think this means that OTT is finally here, and unfortunately I have to say no. But from these time cracks might eventually come bigger fissures. What people are hoping for is the ability to buy only the channels they want without having to buy the big cable bundles. But we still have a long way to go to get to that

The first announcement was from HBO. They plan to roll out an undefined OTT product in 2015. HBO and the other movie channels are unique in the programming world since they are always sold as premium channels and are always expensive. HBO was reported to have over 28 million US subscribers in mid-2013 through terrestrial or satellite TV subscriptions

But HBO also has the most pirated show with Game of Thrones and they have gotten a lot of requests to sell their content on an a la carte basis. HBO has not announced the details of the planned offering, but one can picture it being something like the HBO Go product that comes with most cable subscriptions. It would not be surprising to see their offering consisting of one streaming live channel along with access to the HBO library of content. There has also been no talk of price, but it won’t be cheap. HBO sells its content wholesale to cable companies in the range of $12 per month, so one would expect them to charge an OTT price at least as high as the cable companies, meaning a price of between $15 – $20. Such a product is going to appeal to some cord-cutters and cord-nevers who want to get Game of Thrones and Bill Maher without having to pirate it. But it’s going to be easier and cheaper for most people to buy HBO from their cable company. It’s a smart move by HBO who will probably be able to add a few million new subscribers. But in doing so they are not going to be damaging the traditional cable market

The other announcement this week was from CBS which announced an OTT package for $5.99 per month. This would consist of a live network stream from major market affiliates as well as a library of older content on demand. But for now it won’t include football. This product is a bit more of a puzzle from an OTT perspective. Currently if you buy content from the big cable companies like Comcast you normally get access to the CBS library online to any device. For example, I pay my cable company for a basic package for about $20 that gets me access to the libraries of all four major networks. If ABC, NBC and Fox match the CBS offering, then a person wanting all four networks online would be paying more than they pay for basic cable

The only real advantage of the CBS package is that it comes with a live stream on-line, and this is the first time that a network has offered live content on-line. But one has to ask if that is really worth $6 per month? This is about triple what CBS gets from cable companies that carry their content, so one can see why they want to sell their content for a premium price. But are that many people willing to pony up $6 just to get one channel on the Internet? There will be some but I can’t see this being very popular. After all, in most of the US I can get this on a TV for the cost of a pair of rabbit ears

It’s becoming obvious that any OTT programming that makes it to the web is not going to be cheap. And it’s money that drives the cord cutters. The New York Post reported a week ago that the upcoming Sony OTT package was going to offer 100 channels on the web for $80, while others are reporting a price of between $60 and $65. Those prices are not going to lure many people off cable in metropolitan markets due to the bundling from the big cable companies. Most people are in a position where the cost of their cable internet product rises if they ditch cable TV. In my own case, Comcast would only sell me a 50 Mbps connection if I bought at least basic cable

One has to ask if any of the packages mentioned to date are going to have much appeal. There are going to be the stray customers who will think these products are great. The one with the most chance of success is HBO, because it’s going to appeal to some of those with no cable subscription. But the CBS offer to me is a head scratcher. While there will be some who would love to get network TV on any device, the $6 monthly price tag feels like a lot for one channel. And Sony’s plans are even odder to me. There are certainly people who hate their cable company and would love to change to somebody else. Having 100 channels available on any device sounds attractive (assuming that this won’t only be available on Sony smart TVs). But it’s really hard in metropolitan areas going against the bundle, so it seems that selling packages for about the same price as the cable companies won’t be that attractive. Sony might do better in rural areas for people who want to get off satellite, but those are the areas that often have the worst broadband and where people might not be able to subscribe to OTT programming

None of these announced products are going to make a big crack in the cable market, but these are all the starts to the change. Somebody is going to have to come up with packages that a lot of people are going to find attractive to get any market traction, and that is going to take the willingness of the programmers. They are still making too much from the traditional cable packages to flinch too much. A lot of these early attempts at OTT will probably fail, but that’s what happens to those willing to go first in a new market – a market that consumers want if it can ever be done right.

Chipping Away at the Cable Industry

Digital-tv-antenna-620x400It seems that every day I read a story about some big company who is working very hard to break the cable monopoly and to bring alternate programming packages to the market. Aereo is at the Supreme Court this week for trying just that – for bringing a small package of network channels to cell phones and tablets in major metropolitan areas.

Yesterday I read that Dish Networks expects to have a new service out by late this summer that is going to further chip away at the cable industry. They plan to offer a smaller package of programs over the web that are aimed at Millennials that will let them watch TV on smartphones and tablets for $20 – $30 per month. But I think a package like that is going to be appealing to a lot of households and is going to lead to a lot more cord cutters.

Dish has already signed up Disney, which brings them Disney, ESPN and ABC. They have reportedly been in negotiations with A&E, Turner, Comcast (which includes NBC) and CBS. The largest content providers have reportedly placed some contractual conditions on Dish getting such a package. They must include at least two of the major networks of ABC, CBS, FOX and NBC. They also must include at least ten of the highest-rated other networks in the package.

This concept is not new for Dish and they already sell packages on the web in fifteen different languages that they market under the name of DishWorld. This includes packages at $14.95 per month in Arabic, Hindi, Cantonese, Urdu, Filipino, Punjabi and many other languages and is a great way for emigrants to see programming from their home countries.

In another announcement that came out today, HBO, a division of Time Warner agreed to sell its library of original content to AmazonPrime. This is the first time that HBO or any cable network has made such a deal. This content has been made available on the web to people who subscribe to HBO at a major cable company like Comcast or Verizon. But the content has never been available to people who did not subscribe to HBO.

No one of these deals is going to break the cable industry. However, these two particular deals will chip away at the subscribers who buy traditional cable packages. These are deals that will let people get content on the web in a way they could not get it before. I think it is these sorts of deals that will chip away at the cable industry, and the industry won’t die in a big bang but will die from a thousand cuts.

Dish will lure away a pile of cord-cutters with this package. Verizon Wireless will lure away another pile. Google, or somebody non-traditional will get the rights to the NFL Sunday package and will lure away a pile. Somebody will make a deal with ESPN and the other key sports networks and take a pretty big pile. The Dish deal is the first major OTT deal but it will not be the last. As the programmers find a way to monetize their content over the web we are going to see more and more people dropping the giant packages. Virtually nobody is happy about paying for content they never watch.

Interestingly, not everybody sees the world in this same way. Here is one guy who sees a rebound for the traditional cable providers. He sees an increase in both customers and penetrations through 2019 for the cable industry. Nothing is impossible and we don’t have to wait long to see if he is right, but just about everybody else predicts that the large cable companies are going to keep losing customers and that the rate of loss will accelerate. Every little side deal made with Dish Networks or Verizon Wireless or Google is going to drag another pile of customers away from the big dollar, big-channel packages.

And at some point, the big line-up model starts breaking when programmers start getting less revenues for the less popular channels that are not being included in the new Internet-only alternatives. ESPN and Disney and the other popular networks are going to do just fine since they will probably be viewed by more people than ever. But the other 80% of networks have to be very worried about the trend towards OTT.