Why Do Cable Companies Make Their Viewers' Lives Miserable?
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
For just about any popular show, there's a way to watch it online, whether on Netflix (NASDAQ: NFLX) or Hulu or Amazon. Some shows, for whatever reason aren't available in streaming form.
It's a problem familiar to many Internet users, including Matthew Inman, a cartoonist better known on the Web as The Oatmeal. He documents his frustration in a strip trying to watch the HBO program "Game of Thrones" on the Internet, but eventually has to resort to piracy, after checking iTunes, Netflix and Amazon.
People like Inman who are "cord cutters, "those who watch only online video without a subscription to a cable or satellite service, should represent an easy market, but they stil only represent a small percentage of the total TV viewing market. Although there are around 2 million people ditching their satellite and cable subscriptions for Netflix, Hulu and other streaming services, they only represent around 2 percent of the total market. Although it might seem like bad business to snub people like him, especially with the megaphone Inman has in the form of his widely-read webcomic, it makes perfect sense if you look at the actual numbers.
The most notorious slap in the face toward cord-cutters recently is the Comcast (NASDAQ: CMCSA)-owned NBC Universal's coverage of the 2012 Summer Olympics in London. The website NBC has set up has live streaming coverage of the Games, but requires users to prove they have a cable or satellite subscription.
People who manage not to cut their cords aren't safe from irritating behavior on the part of channel providers and pay TV companies. In recent years, subscribers have been caught in the crossfire between providers and viewers clashing over how much they'll pay to carry their channels on their systems. Most recently, the two major satellite providers, DISH Network (NASDAQ: DISH) and DirecTV (NASDAQ: DTV) both have had popular channels interrupted when they couldn't come to agreements.
DirecTV had a dispute with Viacom (NASDAQ: VIA) that resulted in channels like MTV and Comedy Central going dark. DISH Network is currently in a fued with AMC, who is pulling publicity stunts like sending "zombies" into New York City.
Why would cable and satellite providers inconvenience their customers so much? As mentioned earlier, most people in TV Land still have some kind of subscription to cable or satellite. Even though cord-cutters are a vocal and tech-savvy minority, they are still a minority and it makes much better business sense to target a majority of viewers instead of a minority. Even if socially responsible investing is popular among some investors, publicy-traded corporations are mandated by law to maximize shareholder profits. That means going against the wishes of cord-cutters, at least for now.
Another explanation is that these providers form a natural monopoly. If you already have cable TV service from Comcast, for example, most other cable companies aren't going to be willing to dig up the neighborhood street and run more wire. You wouldn't want them to, either, even if it meant lower cable bills.
Even satellite providers have natural monopolies. If you were a DirecTV subscriber and a fan of "The Daily Show" during the blackout, you could theoretically switch to DISH, but you'd still have your old DirecTV dish on your roof. Plus, you'd have to say goodbye to "Mad Men" or "Breaking Bad," at least until DISH and AMC kiss and make up.
If you're annoyed by how big media conglomerates seem to ignore new technology or get into shouting matches with each other, just remember that they don't hate you personally. Cable and satellite bills are simply what's paying their bills right now.
ddelony has no positions in the stocks mentioned above. The Motley Fool owns shares of Netflix. Motley Fool newsletter services recommend Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
