Good Question: Could HBO Change How We Pay For TV?
MINNEAPOLIS (WCCO) -- HBO just announced that, starting next year, it's cutting the cable cord. Fans of shows like "Veep" and "Game of Thrones" will no longer have to subscribe to the premium channel through their cable TV provider, but rather will be allowed to stream shows on the Internet.
HBO hasn't said how much this new service will cost, but says it's a way to reach the 80 million households without cable.
"Going forward, the growth is coming over the Internet, wireless networks and many other ways other than the cable networks," said technology industry analyst Jeff Kagan. "HBO wants to be a player in that new world and that's why they're staking their claim."
But, will HBO change the way we pay for our shows? On average, people have access to 180 cable channels, but only watch between 10 and 15.
"I'm paying a lot of money for certain shows," said Brittany Ross of Minneapolis. "I know it's ridiculous."
Her boyfriend likes ESPN and she's a big fan of VH1 and Oxygen. She says she'd be willing to pay $30 a month for access to those networks only.
It's an idea called "à la carte cable," where people would only pay for the networks they watch. Sen. John McCain has pushed for legislation that would require cable companies to unbundle their packages, but studies have shown à la carte cable would likely be more expensive.
A report from Needham And Company found that were à la carte cable to happen, 56 channels would survive and 124 would disappear because they wouldn't have enough viewers.
According to the report, it costs an average of $280 million to run a network, which would require 156,000 viewers over a year to be profitable. The study's author estimates networks like ESPN would have to charge $30 a subscriber.
"It keeps getting brought up and it keeps getting buried," Kagen said. "The cable industry does not want à la carte cable."
He's been pushing for à la carte cable as the costs of cable subscriptions have doubled over the past 10 years.
"At some point it's going to have to change. I don't see it changing yet," he said.
But with new competition from companies like Amazon, Netflix and Hulu, Kagan says the cable companies will have to transform. In 2013, cable companies lost subscribers for the first time.
"As some streaming products become more available, cable companies will sit up and take notice," said Dave Berg, a marketing professor with the Hamline School of Business.
Others point out cable will still have a stronghold on its customers as long as most live sports are not available online.
At this point, experts say it's not entirely clear what the cable industry will look like in five to 10 years from now, whether it's à la carte cable, streaming services or something entirely different.
"This industry is going through a major transformation," Kagan said. "It's going to look entirely different when it gets through."
He points to how the iPhone -- something we didn't even know about seven years ago -- changed our world.
