• A Cord-Cutter Comes Back: Behind The Cost of A La Carte Video

    In 2014 I cut the cord. We live in Toronto, Canada, are not a sports family, and watch mostly drama. The kids watch only Netflix, so for them, cutting the cord really had no impact. We made the conscious decision to buy whatever we wanted to watch, as I suspected we would never come close to the monthly cable bill we had just shed.  But the truth is always more complicated, and in a surprising turn of events, I find myself back with Bell Canada’s Fibe TV a year later. 

    A look back at our purchases and motivations is quite revealing, considering the disruption going on in the video industry.

    In 2014, we spent $765 (all figures in Canadian dollars) either buying or renting movies or TV for an average of $64/mo. Breaking this down further:

    - Friday night movie night cost us $263 on rentals. 41 movies over the year, for an average of 3.4 movies a month, with the normal purchase price of $6

    - A healthy appetite for the latest dramas (e.g. “The Good Wife,” “Downton Abbey,” “The Americans,” “The Honorable Woman,” etc.) resulted in 15 seasons passes for a total of $439, or $37/mo

    - We bought 3 (kids) movies for airplane trips - $55

    - Netflix is $8/mo

    If you take away Netflix, and the movie rentals and purchases that would have happened anyway, we spent about $37/mo to replace cable.

    This is a number I can live with. But, here in Canada,  all that streaming puts you in direct conflict with bandwidth caps. Our DSL package was $65/mo for 120 GB. We were paying $15 more a month to get an additional 75 GB for a total download of 195 GB that we were beginning to go over. In December, our 37 GB overage cost us $73.90. Bell wants another $15/mo for unlimited, making my total cost for Internet $95/mo, and the grand total for a la carte monthly TV and DSL, $140/mo.

    I called Bell. At first blush, the $42/mo basic subscription plus the $20/mo for a specialty movie package (TMN in Canada includes HBO/Showcase etc) looks very high in comparison to $37/mo. But then comes the real power of owning the pipe: bundling. If I add Bell Fibe TV, they’ll throw in unlimited Internet for only $10/mo AND lower my phone bill.  The total TV / DSL / Netflix costs with Bell? $135/mo (TV, DSL), or $5/mo less than a la carte.  In addition, they discounted my phone by $10/mo, for a total monthly savings on Internet and phone from bundling are $39/mo.

    As all cable subscribers know, you have to proactively call your service provider once a year and threaten to leave in order to get the best promotional rates, and I have little doubt that some of what I was offered has to do with being a new subscriber. But either way, I find myself in the surprising position of re-ordering cable.

    There are some interesting conclusions from all of this:

    1. A la carte is expensive:  Yes, we are heavy TV consumers, but content providers (and Apple?) have set the price points of season’s passes high enough to make cord-cutting less of an obvious choice. Part of what drove me away was knowing that a large portion of my cable bill was funding live sporting events. But looking at the real numbers, we can get a monthly TV bill that satisfies our drama needs for about the same price, without the constant purchase fatigue of iTunes.

    2. Never count out the MVPD: Yes, I feel mildly coerced by the outrageous price of DSL outside of the bundle. But in the end, the lower bill settles all arguments.  Operators have purchasing power, they own the pipe, and they are buying up content producers. All this means that they have the leverage to make bundles (including discounting less lucrative phone services) that will be attractive to millions of subscribers.

    3. Cord-cutting is not for the masses. There are a bunch of reasons for this:

    - Cable feels better: I found myself missing the serendipity of channel surfing. Also, the Netflix interface is excellent for recommending popular shows, but poor at revealing the rest, so the catalog seemed stale after a while. While Fibe TV’s (Mediaroom) On Demand interface is no better than Netflix, the combination of a thousand-channel EPG and a growing On Demand library feels much richer.

    - Broadcast is a disappointment: During the hockey playoffs, I purchased a TabloTV and hooked up an inexpensive HD antenna. Yes, it took some minor technical know-how but the real reason it never got used was that the content wasn’t compelling. We have become HBO and Showcase junkies and want it all on demand, now. 

    - Where did I watch that show? As content choices, channels and apps grow, the input button becomes a serious headache.

    Pay TV providers are primarily marketing powerhouses who are doing the essential job of organizing the (ever-growing) content for us and serving it up in an attractive package. We are still in a time of incredible disruption, and operators will have to move a little faster and be ever nimble with their pricing and packaging to stay competitive. But today, I’m just happy to have lowered my monthly bill while getting access to more great content.