I actually wondered if this was something cable providers were chewing on in regards to the increased popularity of Netflix and Hulu. Bloomberg reports that companies like Time Warner Cable, Inc, are considering charging customers for the amount of data they consume. The extra charges would likely make people consider whether they want to spend a lot of time streaming full-length movies and TV shows if they get hit with a hefty fee. So cable companies are considering hurting Netflix and Hulu through consumers’ Internet usage. I think this might be a bad move for cable, though.
Cable Likely To Wage War On Streaming
AT&T, which uses DSL, already has a policy in place where, should a customer go over 150 gigabytes of data in three straight months, they will be charged $10 for every 50 gigabytes they use over the limit. Companies like Comcast, Charter, and Cox institute a 250-gig cap and generally, people won’t use that much. Those companies are quoted as saying they are not considering usage fees, but that’s to be expected.
However, Netflix has this spin (from the Bloomberg article):
Netflix steers customers with enough bandwidth toward high- definition movies, which soak up about double the data. If the average U.S. household, which watches more than five hours of television a day, were to transfer all that viewing to an online, high-definition source, their usage would total almost 10 gigabytes a day and break through the current caps.
That’s not going to affect many right away, because it would require the average household to “transfer all that viewing to an online, high-definition source.” Still, the growth of online video keeps getting ramped up every year, so Netflix could very well be looking into the not-too-distant future of movie and television viewing as people continue to migrate to streaming video for entertainment.
Bloomberg quotes Charlie Ergen, chairman of DISH:
“That Netflix subscription of $7.99 could go to an extra $20 a month for bit streaming,” Ergen said during Dish’s conference call on Nov. 7, making a total monthly subscription “the equivalent of $27.99.”
Now, this hasn’t happened yet so I don’t want everyone thinking that this is a done deal. But when you hear news of cable companies “considering” something purely evil, it only becomes a matter of time. People are already dropping cable for their high prices, and now they want to penalize people for using their Internet service to watch Netflix and Hulu. I think there’s only so much cable companies can do to anger customers before all of them implode from the number of defections.
The article sites this study from SNL Kagan concerning TV viewing habits:
…about 12.1 million U.S. households will receive TV shows and movies from Internet services rather than a traditional pay TV provider by 2015, up from 2.5 million homes at the end of 2010…
Look, I can get Internet from a number of providers, it’s just more convenient to have it done through the cable service. But what if I decide I don’t need cable anymore? If it’s too expensive, I just get a different Internet provider and have cable yanked out of my home. I can watch sports in bars and almost all the TV and movies I want just with an Internet connection.
And I’m not sure that the move would entirely hurt Netflix or Hulu, which is available on a variety of formats. The extra cost will always be blamed on the company providing the bill, and the idea that hitting their own customers in the gut, or limiting the amount that they can watch through their wallets, should not bode well with most consumers.
The Bloomberg article discusses an interview with Craig Moffett of research firm Sanford C. Bernstein, who predicts that one of the cable providers will implement the system by next year. He believes that the best thing cable companies can do is try to profit from streaming every way they can, but that if everybody dropped their services, “the loss of revenue would be more than offset by lower programming fees and set-top box spending,” and that, “In the end, it will be the best thing that ever happened to the cable industry.”
I think in the next year, though, should these fees be implemented, we will watch the consumer decide who wins this battle.