Tag Archives: Sling TV

Is Cord Cutting Real?

2000px-Scissors_icon_blackNow that the 2015 cable numbers are final, we can take a fresh look at cable customer trends and at how real cord cutting might be. The best place to start to understand the number of cable customers has always been Leichtman Research, and they found that cable providers lost 385,000 cable subscribers for the year. This is more than double the 150,000 customers lost in 2014 and nearly quadruple the 100,000 loss for 2013. Leichtman says that number represents about 95% of the industry and they have no reliable way to count customers at many of the smallest providers.

The interesting thing about that number is that it differs from many other industry reports that report that the industry had turned around the losses from the year before . For example, right after the end of the year there were reports that the biggest cable companies had a net gain of customers for the year – and they did. But if one looks at those gains closer, it’s obvious that Comcast and Time Warner and a few other large companies put a major emphasis on adding cable customers after their stocks got pummeled in the spring of 2015 when Wall Street reacted negatively to news of cord cutting. Those companies spent a huge amount of advertising dollars last year to get their customer counts up slightly by the end of the year.

But outside of the biggest companies there were plenty of other companies with significant losses for the year. Cablevision and Cable One each lost 87,000 customers for the year and Mediacom lost 35,000. The private companies of Cox, Bright House Networks and Suddenlink together lost over 153,000 customers.

The satellite providers were interesting as usual. Dish reported losing 81,000 customers for the year and DirecTV gained 167,000, for a net gain of 86,000 customers for satellite. But Dish included Sling TV in their counts, and without that the combined loss for the two companies would have been 450,000 for the year. It’s really quite ridiculous to count an OTT service like Sling TV the same as a cable subscription since that is the type of service that cord cutters are changing to. And so, if we subtract out Sling TV from the national counts, the actual loss of cable customers for the year was actually over 900,000.

But even that is not the end of the story. Statistca reports that there were about 1.1 million new housing units added in 2015 (meaning single family homes, condos and apartments). If you assume that nationwide cable penetration is around 75% you would expect the cable providers to have added about 825,000 new cable customers for the year from those new housing units. And if they did so, then those additions would mask losses of cable customers elsewhere. So this would mean the industry lost an additional 800,000+ customers or a total of over 1.7 million customers for the year. I’m not sure why the people that count cable customers never account for the growth of the overall market.

Not counted in all of these numbers are the cord shavers and I don’t think there is any way to count them other than perhaps by nationwide surveys. All of the big cable companies have either added or plan to soon add a skinny bundle that to deliver over the cable system. While this is a really new phenomenon, the early reports are that these packages are really popular. For example, Verizon had one of the first skinny bundles and reported that a majority of their new FiOS cable customers in the fourth quarter of 2015 chose the smaller, cheaper bundle.

The skinny bundles are the cable company’s attempt to keep cord cutters connected to their systems, and it’s likely to be fairly successful. If the cable companies can come up with meaningful alternatives to the giant bundles then many people will opt to downside their cable bill.

But I doubt any of the cable companies are going to share the cord shaver numbers and the only place we might see it is by watching the average cable revenue per customer. But the cord shaving phenomenon is just as significant as cord cutting if customers are bailing on the multi-channel bundles and picking plans with a much smaller number of channels. That is going to drastically reduce the number of people watching many of the less-popular cable networks.

I guess my conclusion this year is that cord cutting is real and that it is accelerating. Cord shaving is probably going to quickly become a much more significant phenomenon as people decide to try to only pay for what they want to watch. And while cord cutting is not nearly as significant yet as the number of people that have fled landline telephones, the combined cord cutting and cord shaving is already large enough to start causing real disruption in the industry – and there is no reason to think it’s not going to get a lot bigger.

The Future for Cord Cutters

RCA_CT100-hdI read an article by Nathan McAlone in Business Insider that opined that people are going to look back five years from now and wish for the good old days of the big cable packages. I suspect for many people he might be right.

Right now cord cutters are definitely happier with dropping out of the big packages and finding smaller solutions that fit them specifically. As a family that hasn’t had a cable package in years, the recent emergence of online content feels wonderful to my family. Even with my few paid choices of Netflix, Hulu, Amazon Prime, and Sling TV I have far more options than I know what to do with. I have found myself liking to binge watch obscure series like Death in Paradise on BBC that is about a detective on a fictional island in the Caribbean. Even with the big cable package I would not have been likely to have found or watched this kind of programming.

But there are going to be long term consequences of cord cutting and of the big cable companies migrating to skinny packages. Verizon FiOS recently reported that a majority of their new customers are choosing their small skinny package rather than the traditional big package.

The main consequence is going to be to programmers. Every customer who cuts the cord or downsizes to a skinny package stops paying fees to a big pile of networks in the traditional bundle. We now know that ESPN has lost 7 million customers over the past few years and they cannot be the only one. One has to think that the same is happening to all of the sports networks like the Big Ten Network or Tennis TV. And it’s likely that over time the same thing is going to happen to any network that doesn’t have worldwide appeal such as religious networks, weather networks, music networks, or even the smaller networks such as Discovery Health that are only carried in the big cable packages.

I see several long term consequences of the shift to skinny bundles. First, I see it returning some of the negotiating power to service providers for those networks that are only in the big packages. Cable companies are going to become more and more willing to say no to programmer demands that they must carry the full suite of everything offered by a programming company. The programmers will still be in the driver’s seat for the most popular networks – those channels that everybody wants to put into their skinny bundles like the Food Network or the Travel Channel. But the programmers are going to lose leverage with their less popular networks because cable systems will be more and more likely to push customers to smaller bundles rather than be held hostage to huge payments for content.

I also see some of the less popular networks folding. The only thing that keeps a lot of these networks going is that they get a few cents per month from 100 million households. When that audience retracts a lot of them are not going to be economically viable.

Interestingly I think skinny bundles will mean more profits to cable providers. The margins on the 300-channel line-ups are getting thinner all of the time. There is the possibility of being able to make more money selling 30 channels than there is for selling 300.

And finally, as the article that prompted this blog suggests, I think eventually it will get very expensive for the cord cutter who wants to buy a lot of different content. It might well cost more to put together the channels that you really want than buying today’s big packages. It’s not hard to imagine a world where ESPN costs $20, AMC costs $10, and a regional sports network might cost $15. Before you know it, if you have a wide interest in different programming, you could pay more than today for many fewer choices. But I think in the long run that the average person is going to do what I do today. They are going to buy a pile of programming and then learn to be happy with what they have bought. I find myself watching things now that I would never have considered years ago – and it works for me. I don’t miss the channels that I can’t see.

OTT By the Numbers

roku-3-2Lately I’ve been reading about how much OTT video services have grown and so I looked to see how big the phenomenon has become. What I found was that you get a different answer depending upon who is doing the counting and how you define OTT.

It’s easy to start with Netflix, which is clearly the largest provider of alternate programming. As a public company they publish their subscriber numbers every quarter and at June 30 of this year they had 29.8 million paid subscriptions in the US and had added 605,000 customers in the quarter. With approximately 134 million housing units in the country that’s a penetration rate of over 22%.

Parks Associates tracks the OTT industry and they recently released a list of the top 10 OTT companies, ranked by the number of paid subscribers. They say there are over 100 pay OTT services available in the US. The top 10 list is interesting and probably includes things that many people aren’t aware of or that don’t think of as OTT. The most recent top 10 list is as follows:

  1. Netflix
  2. Amazon Video
  3. Hulu
  4. MLB TV
  5. WWE Network
  6. HBO Now
  7. Crunchyroll
  8. NFL Game Pass
  9. The Blaze
  10. Sling TV

I think most people would have guessed the top 3. It’s interesting that 3 of the top 10 are sports networks. The subscriber numbers for baseball and football are very seasonal and move up and down the list depending upon the time of the year. Major League Baseball (MLB TV) just announced that starting next season they will only make their programming available to subscribers of a cable service, so they will fall off this list. Crunchyroll features Japanese anime, manga, and auto racing. The Blaze includes Glenn Beck and various other political shows. To show how low the threshold for getting on the list is, number 10 is now Sling TV that just started early this year and currently claims about 400,000 subscribers.

Using the above definition of OTT, Parks Associates reports that 58% of US broadband households have used at least one OTT video service in the past 30 days. They say that a little more than 25% have used two or more different OTT services.

But there are others counting OTT using a wider definition. For instance, the numbers jump way up if you include things like YouTube, which has more viewers than Netflix. The multiservice screen provider Clearleap reports that when counting services like YouTube 71% of households report using OTT services. This count differs from the Parks Associates count by also considering smartphone-only usage rather than only considering homes with a broadband connection.

There are a number of other surveys around also and each differs in defining what is included as OTT and also differ by the type of platform used to watch the content. So any time you see OTT statistics it’s important to dig a bit to understand just what and who is being counted.

One thing that all of the surveys agree on is that younger people view a lot more video than anybody else. Common Sense Media just reported that teens between 13 and 18 use an average of 9 hours per day of entertainment media. This would include not only OTT content, but normal TV, on-line games, social media, and sites like Vine which are not counted as OTT but which include video content. As a parent of a teen I would say that number sounds just about right.

The Non-boom of OTT Programming

Fatty_watching_himself_on_TVI recently looked back at research I did a year ago, and at that time there was a lot of press talking about how over-the-top video offerings were going to soon flood the market, leading to a boom in cord cutters. But in looking at the OTT offerings on the market today it’s easy to see that the flood of new OTT entrants didn’t materialize.

My look backwards was prompted by an article citing the CEO of CBS who said that his network had gotten requests from Facebook, Apple, and Netflix seeking the right for both TV shows and live broadcasts. Those are certainly some powerful companies, and other than Netflix, a company one would expect to be making such requests, it might portend some new OTT offerings. Many pundits in the industry have been predicting an Apple OTT offering for a number of years to go along with the Apple TV product.

I’m a cord cutter myself and so I’m always interested in new OTT offerings. But for various reasons, mostly associated with price, I am not very interested in most of what is out there today. We subscribe to Netflix, Amazon Prime, and I’ve tried Sling TV twice. But I have not seen any compelling reason to try the other OTT offerings. The list of pay OTT content that’s available is still pretty short, as follows:

  • Showtime: $11 per month with an Apple TV device (which I don’t have).
  • HBO Now: $15 per month with an Apple TV device, and coming soon to Google Play and through Cablevision.
  • CBS All Access: $6 per month but blocks sports content like the NFL.
  • Nickelodeon Noggin: $6 per month.
  • Sling TV: $20 per month. Mix of sports and popular cable networks.
  • PlayStation Vue: Starts at $50 per month. Includes both broadcast and cable networks. This seems like an abbreviated cable line-up, but at cable TV prices.
  • Comcast Stream: $15 per month, only for non-TV devices and must have a Comcast data product. A dozen broadcast networks plus HBO and Streampix.
  • Netflix: $8 per month.
  • Amazon Prime: $99 per year. Includes free or reduced shipping on Amazon purchases and free borrowing of books and music.
  • Hulu Plus: $8 per month with commercials and $12 without commercials. Mostly network TV series.
  • Verizon Go90: Free to certain Verizon wireless customers.

So why hasn’t there been an explosion of other OTT offerings? I think there are several reasons:

  • The standalone networks like CBS and Nickelodeon are basically market tests to see if there is any interest from the public to buy one channel at a time. These channels are being sold at a premium price at $6 per month and it’s hard to think that many households are willing to pay that much for one channel. Most networks want to be very cautious about moving their line-up online and are probably watching these trials closely. One doesn’t have to multiply out the $6 rate very far to see that any household trying to put together a line-up one channel at a time is going to quickly spend more than a traditional expanded basic cable line-up for a lot fewer channels.
  • HBO and Showtime have nothing to lose. The Game of Thrones has been reported as the most pirated show ever and so HBO is probably going to snag some of the cord cutters who have been pirating the show. The prices for these networks are just about the same as what you’d pay for them as part of a cable subscription. But there aren’t many other premium networks out there that can sell this way.
  • One has to think that the major hurdle to anybody putting together a good OTT line-up is getting the programmers to sell them the channels they want at a decent price. The programmers don’t have a major incentive today to help OTT programmers steal away traditional cable subscriptions. Whereas somebody like Sling TV might buy a few channels from a given programmer, that programmer makes more money when cable companies buy their whole lineup. So it’s likely that the programmers are making this hard and expensive for OTT companies. I’ve not seen any rumors about what companies like Sling TV are paying for content, but Sling isn’t like most OTT companies in that it is owned by Dish Networks who is already buying a huge pile of programming. It’s got to be harder for somebody else to put together the same line-up. The dynamics of this might change someday if there a true bleeding of traditional cable customers fleeing cable companies. But for now cord-cutting is only a trickle and most of these networks are still expanding like crazy overseas to make up for any US losses.

Update on Sling TV

Fatty_watching_himself_on_TVI first tried Sling TV in March during the NCAA tournament. The experience was so bad in watching just one basketball game, I finally gave up. I couldn’t keep a signal long enough to make it work.

So it’s been nearly six months and we are at the beginning of the college football season and I thought I would try again. If anything the experience was worse. I tried to watch Maryland play Richmond, which was on ESPNU. So I paid my $20, found out that ESPNU was an additive and paid $5 more and sat down to watch the game.

I had all of the same problems I had 6 months ago. During the course of the game I got 3 blue screens of death. The only other time that’s happened on this computer was the last time I watched Sling TV. The signal also kept freezing and I had to reboot to get it going again. Since last spring they have added an apology message when this happens, but it happens a lot and after a while you start cursing the error message. When you try to log back in to a game, Sling TV often doesn’t recognize your credentials and you have to close and reopen the program multiple times.

Maryland’s punt returner, Will Likely, had a Big 10 record day returning kicks and every time he touched the ball was electric. Or so I hear since I missed several of them.

To give a little credit to Sling TV, I went to several sports forums where others were talking about watching the Maryland game on TV and they reported that the signal was poor.

So then I did some channel surfing among the other broadcast (non-sports) channels. I never got booted out of any of these. There were major issues with audio. The volume difference between stations was huge and I could barely hear the Rocky marathon even with my computer sound system on full, a setting that would normally break out my windows. And like last spring, several times the audio feed lagged the video feed and I had to reboot the feed.

Bottom line is that after six months of doing this, Sling TV has exactly the same problems that they had during their first month online. They are still not ready for prime time. If any OTT provider wants to get the sports audience they are going to have to do much better than this. It is still better to listen to streaming radio than to watch a sporting event on Sling TV.

Live Streaming on the Internet

olympic-rings-on-whiteI wrote recently about how Sling TV had problems with the NCAA basketball games, and particularly with the final game between Kentucky and Wisconsin. I watched the Maryland games in the first two rounds of the tournament and reported how awful my experience was.

But Sling TV is not the only one to have trouble with live streaming. I recall last year when HBO Go had a terrible crash with the streamed season premier for Game of Thrones. And the Oscars last year also failed when ABC tried to stream the event.

Live streaming is just that – it’s when a live event is being put over the Internet in real time. This is opposed to the way that Netflix, Amazon Prime, and other online services stream. When you watch one of those services they send a big burst of data at first and they provide enough download to stay a few minutes ahead of your viewing. As you watch, they stream more and try to stay ahead of you. Since you are watching a cached copy of what you have already downloaded the viewing experience is always a good one.

In these three above examples of live streaming problems the companies blamed the issue on unexpected demand. Certainly there might have been millions watching the Oscars and Game of Thrones, but Sling TV had maybe 100,000 viewers of the final four. And I’ve had problems watching less popular sports events on Sling TV where they probably didn’t have more than few thousand viewers.

I really can’t buy the excuse that the live streams failed because any of these companies had too many viewers. That’s a good excuse to hide behind. But in reality they only send out a small number of live streams to the world – it’s not like they initiate a stream for every viewer who is watching. They instead send a stream to the backbone carrier, such as Cogent or Level3 with whom they are interconnected. A company like HBO might also have direct peering with Comcast and a few other large cable companies and telcos. But most programmers that do live streaming are handing off the live stream to an underlying carrier.

Their problems are going to begin if they hand off everything as routine traffic to an underlying carrier. Unless a content provider requests some sort of priority treatment of their streams then it’s going to be treated like everything else on the web. One would imagine that the stream of a major event is going to end up being sent to nearly every one of the thousands of ISPs in the country. And many of them are far down the Internet food chain and get their bandwidth via numerous hops from one of the main ISP POPs.

There are streaming events that have been successful. Consider the Olympics online. There, NBC transmitted not just one event, but many at the same time, and at least at major ISPs the reports on the quality were very positive. It’s almost certain that NBC paid extra and made arrangements to make sure that the Olympic stream had a high priority through the backbone. In case you are wondering if that is against net neutrality, it is not. Net neutrality looks mostly at the customer side of the network while carriers are allowed to pay for arrangements needed to make their service operate as intended through the backbone.

The reason that you don’t hear ISPs commenting on the issue is that some of the streaming problems come from your local ISP. The issue that most affects streaming video is latency, and ISPs are all over the board when it comes to latency. Latency is the average time it takes a signal to get to you, and ISP networks can have hardware, software, and routing practices in place that result in increased latency to the signal. And as mentioned earlier, one of the biggest sources of latency is the number of hops a signal has to take on the web between its source and a given network/end user.

When I lived in the Virgin Islands the latency was horrendous as we were at the end of the Internet food chain in North America. But a lot of rural places and rural ISPs in the country also suffer from poor latency because they buy their internet from somebody who buys from somebody else and they might be half a dozen carriers deep in the delivery chain.

The final source of a bad viewing experience can come from your home. You may have an old or outdated cable modem, or if you are using WiFi to get internet to your viewing device you might have a lousy WiFi router. So even if a good signal makes it to your house, your own gear might be gumming it up. When Sling TV got a universal thumbs down for doing poorly we know that they had big problems at the originating end, and they probably did not elect to pay for a premium routing of the event. But unfortunately for live streaming companies, there are always going to be customers who have a bad experience for reasons out of the programmers’ control. It might be a long time until the whole Internet is ready for high quality live streaming.

The Skinny Cable Line-up

Fatty_watching_himself_on_TVIt’s going to take some time to see if Sling TV can fix their technical issues and be successful as an on-line TV product. But perhaps they have started something that will be the wave of the future. The most interesting thing about Sling is that they have a skinny base programming package to which a customer can then add small packages of optional channels. Sling has put some of the most popular channels in the base tier, so there are likely going to be some homes that will find just the skinny line-up attractive. While this is not a la carte TV where a customer can pick what they want, it brings more options than what we are used to having.

Verizon just announced that they are going to offer a skinny option on their FiOS TV. The Verizon offering is not as skinny as the one on Sling TV, but the Verizon package includes all of the major networks, PBS, and other local programming within the base package. The base Verizon package has 36 channels and it looks like a customer must then choose two add-on bundles that have from 10 to 17 channels. The add-on bundles are by type of programming such as a kid’s bundle and a sports bundle.

Verizon is proposing to sell the base plus two bundles for $54.99 per month on a standalone basis, but it gets much cheaper when bundled with broadband and/or telephone. For example, a bundle of symmetrical 25 Mbps broadband and the TV is only $64.99, or $10 more than the TV alone. A customer can add telephone for another $10 per month. Verizon says they will let people switch the add-on bundles, so people aren’t going to be stuck with only two.

Of course, we have a way to go until service providers can easily offer the skinny packages. Just yesterday ESPN announced that they were suing Verizon to stop them from including their channels in the skinny bundle. A few other networks are also  unhappy with the proposed Verizon line-up and we will have to wait to see if and how the product actually makes it to market. The skinny line-up might need to wait until the FCC comes out with some rules for Web TV since the programmers are obviously going to be very careful to not allow products that produce real competition with their bread and butter traditional cable TV subscription base.

Like Sling, Verizon is not a la carte TV, but it is a start in that direction. Nielsen just released a report that shows that people barely watch the content they get in the big cable bundles. The average household today receives 189 channels but only watches an average of 17.5 of them. Interestingly, the number of channels foisted onto people has grown dramatically; in 2008 the average home received 129 channels but watched the nearly identical 17.3 of them.

Cable is expensive because it has millions of people paying for channels they never watch. I know the last time I had cable I programmed my remote to only surf the channels I watched and I skipped the rest. The Verizon package, while not exactly skinny, pulls down the number of channels received by a household to a more manageable 60 or so.

The most interesting thing about this change is that it’s possible that Verizon will make more money on this skinny line-up than they do selling the giant one. They must pay for all of those 189 channels that people get whether people watch them or not. One would think their programming cost for these smaller packages is going to be significantly reduced.

Verizon and other cable providers are also in the process of quietly dropping channels to reduce their cost. For example, Verizon recently dropped the Weather Channel since they believe that most people check the weather on their smartphones today and do not watch TV to see the latest weather. Going to the skinnier base line-up is going to give Verizon more ammunition to slice other channels (or at least not pay for them for a lot of their customers).

While this trend toward skinnier line-ups is just starting, if it is successful it is going to have a dramatic effect on programmers. The cable providers like Verizon are going to put as many of the most popular channels into these smaller packages and that is going to leave a lot of less popular networks out in the cold and facing reduced revenues. There are over a hundred cable networks that thrive today because they can count on getting a small payment of a dime or less per month from a hundred million customers. But if the movement to smaller packages is popular, a lot of these networks are going to see vastly reduced earnings, and over time many of them will fade away.

To the extent that more web TV providers can come up with packages that people want to watch, one can imagine cable companies copying the most popular ideas in order to keep the customers on their networks. As you can see by the bundle packaging above, the cable providers have a huge advantage over any online provider since the cost of a customer’s broadband rises significantly if they drop cable altogether.

Web TV Not Hitting the Mark

Old TVI am sure that the day will come when there will be OTT web programming packages that will be legitimate competitors to cable. But that day is not here yet. We are starting to see the beginning of web TV, but nothing out there is yet a game changer.

And that is not surprising. We still live in a world where content is under the very tight grasp of the programmers and they are not about to release products that cannibalize the cash cow they have from the cable providers. The early web products are being touted as attempts to lure in the cord cutters and cord nevers who no longer buy traditional cable.

Here is what we’ve seen so far:

  • Sling TV is certainly priced right, starting at only $20 per month. That price includes ESPN as well as a few other popular channels like the Food Network and the Travel Channel. They have a growing list of add-on bundles priced at $5 each. And they are just now launching HBO. But there are problems with the service. As I covered in a blog a few weeks ago, watching some NCAA first round basketball games on Sling TV was the most painful sports watching experience I’ve ever had. And it’s been widespread that they botched the NCAA finals. But there are drawbacks other than the quality. For example, you can only watch it on one device at a time, making it family unfriendly.
  • Sony Vue has two major limitations. First, right now it is only available through a Sony Playstation which costs between $200 and $400. And it’s not cheap. They have three packages set at $49.99, $59.99, and $69.99. Without even considering cable bundle discounts, these can cost as much or more than normal cable.
  • Apple’s TV product is not even on the market yet. Their biggest limiting factor is that it’s going to require the use of a $99 Apple TV box. That unit has been far less popular than the Roku. Apple says they will have ‘skinny’ pricing similar to Sling TV.

There are several major factors that will work against web TV for the foreseeable future:

  • Incumbent Bundle Discounts. All of the major incumbent providers sell bundles of products and they charge a premium price to drop the bundle and go to standalone broadband. That is, if they will sell naked broadband at all. For instance, Comcast has no option for standalone broadband faster than 25 Mbps. When people do the math for canceling traditional cable many of them are going to see very little net savings from the change.
  • Issues with Live Streaming. People have become used to a certain quality level of web viewing due to Netflix and Amazon Prime. But those services cache their product to viewers, meaning that when you first start watching they send a burst of data and they then stay about five minutes ahead of where you view. This eliminates problems due to variance in the Internet connections, making the viewing experience smooth and predictable. But there is a far different challenge when streaming live content, meaning shows that are broadcast at set times. Such shows are largely not cached, and thus are vulnerable to every little hiccup in a viewer’s local network (of which there are many which becomes apparent when watching live sports on the web).
  • Programmer Bundles. Programmers make a ton of money by bundling their content to the ISPs. Comcast, Verizon, and everybody else are not able to pick and choose the content they want. There are seven major program owners that control a big majority of cable channels, and when you want any of their content they generally insist that you take almost all of it. This lets the programmers force ISPs to take programs that they would likely never otherwise buy. Web TV is trying to differentiate itself by offering smaller bundles. But I am sure that programmers are making the web providers pay a premium price for choosing to take only a subset of their channels.

The FCC is currently looking at the issue of web TV and they might make it easier for web companies to obtain content. If they do so, one would hope that they also make it easier for wireline cable providers to do the same. Nielsen released statistics late last year that show that the average household largely watches around eleven channels out of the hundreds that are sent to them. Consumers and cable providers would all benefit greatly if the programming that is being forced upon us better matched what we actually want to buy.

The web TV companies are trying to do just that and put together packages of just the most popular content. But I laugh every time I see them talking about going after the cord cutters, who at this point are largely younger households, because the content they are choosing for the web so far is popular with people fifty and older (sometimes much older). I can’t see too many younger households being attracted to these first web TV packages. If the rules can be changed so that different providers can try different packages, then we might someday soon see a few killer web packages that can give traditional cable a run for the money. And perhaps what we are already seeing will be the wave of the future. Perhaps there will be numerous web TV offerings, each attracting its own group of followers, meaning no one killer package but dozens of small packages each with their loyal fans.

My Review of Sling TV

Fatty_watching_himself_on_TVAs I mentioned in an earlier blog, I signed up with Sling TV because I wanted to see what web TV is like. My household is already a big user of Netflix, Amazon Prime, and Hulu, and I have a very good opinion of all of those services. I will admit that I don’t watch Hulu as much as the other two since I have yet to buy the premium service there, and so for now I suffer through the commercials. But all three of these services have a decent level of quality and I have rarely had problems watching what I want to watch.

I also have access to HBO Go. Comcast forced me into a small TV bundle in order to get faster Internet, and so I have the basic package that consists of the major networks plus they threw in HBO. I like the quality of the HBO online product, and in fact it seems to have better picture quality than the other web services, although it boots me from time to time.

But sadly I have not had the same experience with Sling TV. One of the reasons I got Sling TV was to watch the NCAA basketball tournament. It turns out that my favorite team, the University of Maryland, was playing two games on TNT, and these games were not available anywhere else on the web. I also caught U of M’s women’s basketball game on ESPN2.

The experience of trying to watch basketball on Sling TV was painful. It started when I first tried to log on to the service and repeatedly got the message that the feed was not currently available. It took me almost ten login attempts to make a connection. When I finally connected, the ‘reception’ was pretty good, about the same quality that comes with standard definition service on Netflix. The picture was clear enough and it looked good on my 27 inch monitor.

But after about ten minutes it started to have problems. First, I lost my connection and it took me a full ten minutes to reconnect. To a basketball fan that’s an eternity. I finally got the game back and it was pretty decent quality again. But then I started having problems with the audio. The announcers’ voices started clipping to the point where I had a hard time understanding them. Within another ten minutes the audio had also gotten almost two seconds out of synch with the video, with the voice coming in before the picture. This was really disconcerting.

I found that if I restarted the service that I could fix the voice, but I again needed multiple attempts to get reconnected. By the second half of the basketball game the audio was just so awful that I turned off the sound and listened to the rest of the game on Sirius radio while watching the video. There were times during the game when I got significant pixilation, although this tended to clear itself after a few minutes each time.

I had this same thing happen on other channels including ESPN, ESPN2, and the Food Network. The problem was not as pronounced on ESPN, but the audio problems were still there.

I have a 50 Mbps cable modem that has low latency, and I can’t remember ever having any major issues on Netflix or Amazon Prime. In hundreds of hours of viewing I may have been booted from those services maybe three times. So I know it’s not my Comcast connection. The problems I had with Sling TV are puzzling since it’s a unicast and every viewer gets the same signal at the same time. I’m curious how many other viewers had the same problems I did.

There are some good features of the service. While they advertise that you get ESPN and ESPN2, a subscription also gets you a feed into ESPN3, the online ESPN programming. I looked at several college baseball games, some wrestling, and soccer on ESPN3. The feeds I watched for past events did not have the same issues, so perhaps the problem is only with real-time feeds. I was not given access on ESPN3 for content on the SEC network, but I find that understandable.

But for now, until Sling TV figures out these issues, the service is not ready for prime time. This makes me sad because I want web TV to be successful. But my experience of watching several basketball games was horrible and was some of the worst sports viewing experiences I have ever had. This was even worse than trying to watch sports via satellite on days when the pixilation is bad. Luckily you only have to buy it one month at a time and I will come back in the fall when it’s football season and try again. I would certainly caution folks against signing up for the three month subscription they are offering without trying it first.

If web TV is going to succeed they have to be able to offer the same quality that people expect elsewhere. They are directly competing with Netflix and Amazon Prime and customers can easily compare their quality against those services. But they are also competing against the quality of normal cable TV systems and satellite. If web TV isn’t at least as good as those two alternatives they will have a hard time retaining customers.

Some Thoughts on Sling TV

Old TVSling TV is the first on-line package of programming that is offering a real alternative to the big cable packages. They have put together a package of 15 channels for a base price of $20 per month.

The channels included are ESPN, ESPN2, TNT, TBS, the Food Network, HGTV, the Travel Channel, Disney, the Cartoon Network, ABC Family, CNN, Maker, adult swim, El Rey and Galavision. Additionally, they offer three add-on packages for $5 each: one for sports, one with news and info, and one for kids.

This is being marketed to cord cutters — people who once had cable. A survey from Esperian marketing near the end of last year put cable cutters at 5.5% of households. To put that into perspective, that translates into 8.6 million households. But there is a larger potential market that is not much talked about, which are the cord-nevers who have never had cable TV — a little more than 24 million households.

The first news stories I saw about Sling TV assumed the package is aimed at millennials, since younger households are leaving cable at the fastest pace. But the demographics of the channels in the line-up paint a different picture. Consider the following average ages of those who watch the following Sling channels: CNN (59.1), ESPN (48.6), ESPN2 (53.1), HGTV (56.4), TNT (53.6), Travel Channel (48.2), Food Network (47.6), and TBS (44.4). There are a few channels for kids: Cartoon Network (11.9) and the Disney Channel (11.7). Overall the average age of the viewers of the Sling channels is 48 years old. That’s not exactly a millennial line-up.

There is also a rumor that some of the contracts for programming are putting a subscriber cap on Sling TV at somewhere between 2 million and 5 million total customers. That would be one way for the programmers to stop the online phenomenon from getting too large. They do not want to put at jeopardy the 100 million households that have a cable subscription of some sort.

All of the numbers say that the market is ready for online TV. Just last week it was announced that between the fourth quarter of 2013 to the fourth quarter of 2014, overall live TV viewing dropped 12.7%. That’s the average drop, and varied between a 23% drop for Viacom (MTV, Nickelodeon, Spike, and Comedy Central) and a 7.5% drop for Disney, including ESPN.

A number of analysts say that the viewers that left cable didn’t go away, but instead shifted to streaming services like Netflix and Amazon Prime. This trend will bring about changes to the cable industry. Losing advertising eyeballs at this rate is going to translate to less advertising dollars going to cable channels and networks.

One can see this shift already happening in the advertising world. In 2012 there was $39 B of advertising online and $64 B on TV. By 2014 online advertising had grown to $52 B and TV advertising to $67 B. 2015 is projected at $57 B online and $68 B with TV. One can envision that soon after that TV advertising is going to trend downward along with the lost TV viewers.

I look at Sling TV as the first volley among many to provide more programming online. Both Verizon and AT&T say they will have an online programming package sometime in 2015. There have been rumors of a package from Google and also that Apple is taking another run at this. And some of those who have tried in the past like Sony and Microsoft might give it another shot. Even CBS is now streaming their content online for a fee.

This trend towards online programming is likely to get a major boost from the FCC later this year. The FCC is looking at the barriers that programmers have in place against online programming and it’s clear that the sentiment of Chairman Wheeler is to enable more online TV. The current docket at the FCC asks if we should give online programmers the same rights to get content as cable companies. If they are given that right, then online programming will explode.

I am probably going to buy Sling TV. This might even prompt me to buy a television. My interest in TV networks is really limited. My perfect package would be ESPN, the Big Ten Network, HBO, the Food Network, the Travel Channel, and Comedy Central. Sling TV provides me with half of my wish list, which is not bad for a first volley.