Just Add Channels

Interesting news earlier this month that Comcast is beta testing a new vMVPD service called ‘Instant TV.’ Priced at $18/month, the service includes live on on-demand broadband access to the major broadcast networks, as well as a cloud DVR and basic on-demand library.

Is this the future of basic cable? And if so what does it mean for the future of TV? Two thoughts…

1. Streaming Is The New Coax
Cable TV used to consist of an actual cable. Seriously. Instead of using an antenna to receive snowy broadcast stations and a picture that occasionally scrolled randomly (giving viewers vertigo), people signed up with the local cable company for TV service. These nice folks owned a giant antenna (and later satellite dishes) on a hill outside time that was hooked to a network of coaxial cables that crisscrossed your town and could be connected to your house. Once linked to this magic network, you received a perfect quality (for analog) signal 24/7/365. Even better, if you asked them nicely (and paid an extra fee), you could get extra coax connections in just about any room of the house.

When I was in middle school, this actually included a coax hook-up in my bedroom. This allowed me to watch reruns of Perry Mason and Make Me Laugh on my 13-inch Sony Trinitron. That was about as good as TV could get in the 1980s.

Times have changed just a bit since back then, and people increasingly have neither cable set-top boxes nor Sony Trinitrons in the bedroom. Instead, people have WiFi-enabled smartphones, tablets, and laptops that they use all over the house. These devices are good at displaying video, but only if it can be streamed over an IP connection. Sure, local stations are still broadcasting over-the-air (OTA) for free, but what good is that really? Neither an OTA antenna nor a coax cable connects real well to an iPhone or iPad.

Comcast Instant TV solves that problem by (legally) streaming these broadcast stations to any browser or connected device. I’m not sure whether a handful of broadcast channels is worth $18 a month. but this solution clearly does solve a real problem. Interest that nearly a half-century after its inception, the cable company is still making money by solving the basic problem of how to let people watch TV in the comfort of their bedroom.

2. Legacy Broadcast TV Is Becoming Less Valuable
The most interesting thing about the Instant TV announcement from my perspective is skepticism about the price point. Most pundits immediately questioned whether $18 for a bundle of broadcast channels was worth it. Nearly all pointed out that the same channels could be obtained for free with an OTA antenna (thereby completely missing the above point that such an arrangement does not let you watch on anything other than a single living-room TV). Interestingly, most reviews compared the cost of Instant TV with either SVOD services like Netflix (now $11/month) or skinny-bundle vMVPD services like Sling TV (which starts at $20/month and includes access to ESPN). Either way, the consensus seems to be that $18/month for 6-7 broadcast channels is okay, but nothing to get excited about.

My reaction to this reaction is that the value proposition of legacy broadcast TV is slowly coming apart at the seams, for a couple of reasons.

The first is basic supply and demand. The ubiquitous availability of free AVOD, Netflix, skinny bundles, as well as direct-to-consumer services like CBS All-Access ($5.99/month) are changing consumer’s fundamental perceptions about how much TV should cost. There is a real risk here that TV is on the edge of a deflationary spiral. The viewer has so many options for video, much available for free or at very cheap prices, that plain old broadcast TV simply isn’t as valuable as it once was.

The second reason pertains to impact of quantum viewing. The consumer has come to expect anytime/anywhere access to video content such that live linear broadcasts are increasingly irrelevant. Yes, 20 hours of cloud DVR and a few on-demand shows is better than nothing on this score, but it’s hardly Netflix or HBO with in terms of representing a meaningful library of content.

Comcast is positioning Instant TV as a low cost add-on for its broadband Internet subscribers that no longer subscribe to pay-TV. The fact that even $18 a month may be too much to charge for such a service says all one needs to know about the challenges legacy pay-TV faces going forward.

Stick with TDG and stay ahead of the curve.

Joel is a Senior Advisor for TDG and serves as an advisor and Board Member to the video ecosystem and technology companies. He lives near Seattle, WA.