July 2, 2013

So Cox is Trialing a $35/month Internet TV Service — Really?

As my friend Todd Spangler at Variety exposed last Friday, Cox Communications, the nation’s third largest cable provider, is not standing still when it comes to defending against cord cutting. It launched a beta trial in Orange County California of its “flareWatch” service, a broadband-only TV package that, for $34.99/month, offers 97 channels and 30 hours of network DVR storage (Cox already offers cloud-based storage under the “myflare” brand). The service is available only to Cox broadband subscribers, Premier level or higher.

Is this the right combination of content and price to lull Pay-TV Refugees back into the fold?

Before we dive into the specifics of the service, keep in mind that to get this combination of channels from Cox through traditional cable TV, one would have to subscribe to Cox Advanced TV package (300 channels, $63.99 per month), while the company’s TV Economy package offers many of the same channels sans ESPN.

The consumer-premised equipment Cox selected for the flareWatch trial is Fanhattan’s Fan TV set-top system, which features a touch-based remote control. Also unique to the flareWatch service is the fact that flareWatch subscribers have to pay $99 per box upfront, with a limit of three STBs per home (conveniently the same price as an Apple TV iSTB).

In terms of content, flareWatch offers a combination of local broadcast TV and a very pleasing array of cable channels including, among others, ESPN, ESPN2, TNT, Disney Channel, ABC Family, Fox Sports West, CNN, CNBC, Nickelodeon, A&E, Discovery, Bravo, USA, TLC, MTV, Fox News Channels, Food Network, and SyFy (60 in HD).

Again, I think this list of channels is killer and, as a cord cutter myself, should Comcast decide to offer such a package in my area, I would be highly likely to sign up. But that’s just me. Back to the questions posed above — is this the right combination of channels and the right price for this type of service?

Good questions, and ones that TDG can answer. For several years we have surveyed broadband users as to the channels they would include in their top-10 “must-have” list for a new broadband TV service (How convenient, you say? That’s called the TDG Difference, folks!).

In terms of channels, TDG’s most recent research on the subject (mid-2012) reveals below the top-10 “desert island” channels. I tested this list against the channels that Spangler mentioned in his original article, not the entire 97-channel lineup (which could not be obtained as of the publication of this piece). I expect many other top-20 channels will also fall within the service scope.

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As noted, Cox has included many of the channels that adult broadband users most covet, including the ESPN suite (which was a pleasant surprise given that it is the most expensive suite of channels for operators to carry — over $5 per subscriber). Only one of the top-10 channels did not make Variety’s list: Comedy Central, which is likely in the longer list of 97 channels.

So content seems to be covered. What about price? Is the $35 price point reasonable enough to attract a sufficient number of users? Short answer: yes. Long answer: yes, but more than Cox would like.

In the same mid-2012 survey, TDG asked adult broadband users (almost nine in ten of which subscribe to a pay-TV service) how likely they would be to sign up for this type of broadband TV service (literally a combination of broadcast TV and a short but appealing list of cable channels) and cancel their traditional pay-TV service (yes, outright cancel their service in lieu of this more limited but lower-priced broadband TV service).

We randomly tested four monthly price points: $25, $45, $65, and $85. At the two prices closest to the $35/month Cox is charging, we noted the following results:

  • At $25 per month, 54% of ABUs are to varying degrees likely to do so (38% highly likely).
  • At $45 per month, 44% of ABUs are to varying degrees likely to do so (26% being highly likely).

If one splits the difference to represent the $35 per month that Cox is asking for the flareWatch service, some 49% of ABUs are to varying degrees likely to cancel their regular pay-TV service and sign up, with around 32% being highly likely to do so.

I’m pretty sure this is not what Cox desires, thus I’m convinced this is an experiment or research study more than a market trial. In fact, I’d be surprised if, at this price and content combination, this “trial” goes beyond beta.

So what’s really going on here? Is Cox really “trialing” a service to counter the growing cord-cutting problem (that’s the party line, but one without a future), or could it possibly be toying with forbidden fruit; preparing an online-only service to deliver outside of its own territory? Now that’s an interesting thought!

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