Tuesday, August 14, 2018

Switching Away from Cable: Too Much Work?


In the third quarter 2017, TiVo Digitalsmiths surveyed approximately 3,000 U.S. households and asked respondents what TV channels they would want included in a customizable bundle.  There was good news and bad news for Disney.  Among the top twenty channels, ABC was ranked the most preferred, with 66.3% indicating a preference for it to be included in an a la carte bundle.  CBS (63.6%), Fox (59.4%) and NBC (55.4%) were ranked second to fourth and the FX Network was ranked sixth.  Disappointingly, ESPN (39.6%) was ranked 17th.

This got me thinking.  What channels would be “must-haves” for my family and would a new bundle and service make me/us happier?  A critical part of answering this question is defining happiness in terms of channel access and what I would like to pay for it.  Full disclosure: This is not the first time I sat down to figure out how to save money on the cable bill.  Each time, I got frustrated as it seemed to take way too much time to compare options among just four options– Verizon FiOS (current provider), Comcast, AT&T/DirecTV, and Dish.

As I compare options, I check for the inclusion of the broadcast networks, ESPN’s suite of channels, and news and entertainment channels like CNBC, TNT, and TBS.  This handful of channels are all part of my current bundle with Verizon FiOS that are included in a triple play for $119.98 per month ($139.99 with a $20 discount).  Specifically, I get 425+ channels (Ultimate), Internet (50/50), digital voice, 3 set-top boxes, and DVR service.  I subscribe separately for Netflix and Amazon Prime. 

From what I can tell, a “comparable” service from Comcast, excluding cable box rentals and DVR service, would be its Select service at a monthly price of $99.99 for digital voice, 210+ channels, and internet download speed of 150 mbps.  I would have to agree to a two-year term.  I could go “crazy” and sign up for the OTT service, DirecTV Now, and get 85+ channels for $55 per month.  There would be no cable box rental fees, but I would have to buy unbundled internet access from a broadband provider (Verizon or Comcast) at a price of about $50 per month for 100 mbps download speed.  I would also need Smart TVs or streaming players (e.g. Roku) to view video on my TVs. 

As I write, I am getting more frustrated and coming to the realization (again) that I probably will maintain the status quo.  The differential is not significant enough while the opportunity cost of switching seems too burdensome.  They got me, but I’m not happy!

Thursday, August 9, 2018

Tribune Media: Moving On

Not surprisingly, Tribune Media walked away from its $3.9 billion merger agreement with Sinclair Broadcast Group.  During the company’s earnings call on Thursday, Tribune’s CEO, Peter Kern, stated that “In light of the FCC’s unanimous decision, referring the issue of Sinclair’s conduct for a hearing before an administrative law judge, our merger cannot be completed within an acceptable timeframe, if ever.  This uncertainty and delay would be detrimental to our company and our shareholders.” 

This means that Tribune is moving on and moving on means that the firm is back on the market and ready to make a deal.  The question is with whom?  Gray and Raycom are off the market with their pending $3.6 billion deal.  The second largest TV station owner, Nexstar, with 171 stations in 100 markets is a real possibility because adding Tribune’s 42 stations in 33 markets, most of them in the thirty-five largest DMAs, increases its national reach and scale.  The “feel” of this deal is very similar to the Sinclair-Tribune merger and would require some asset sales prior to gaining regulatory approval. 

Another possible suitor is TEGNA which owns 47 stations in 39 DMAs and is the largest owner of big four (ABC, CBS, FOX, and NBC) network affiliates in the top 25 markets.  With this possible merger, economic efficiencies would come more from economies of scale and scope, sharing resources (e.g. local news production, syndicated programming) across multiple products (stations) and markets.  In review of the merger, however, the FCC would apply the 8-voice test which would allow a firm to own two TV stations in the same DMA market as long as eight independently-owned, full-powered, stations remained after the purchase and at least one of the stations is not ranked among the top four stations in the DMA (based on audience share).  Consequently, sale of some stations would be necessary to win regulatory approval.  Ready and willing buyers in the wings might well be both FOX and CBS.




TRIBUNE
CBS
FOX
TEGNA
Largest 35 DMAs
No of full power TV Stations
Primary Network Affiliations
Main
Other
Main
Other
Primary Network Affiliations
New York
23
CW
x
IND
x
MY

Los Angeles
27
CW
x
IND
x
MY

Chicago
16
IND
x

x
MY/CW

Philadelphia
21
MY
x
CW
x
---

Dallas
18
CW
x
IND
x
MY

Washington
16
CW
---
---
x
MY
CBS
Houston
17
CW
---
---
x
MY
CBS
San Francisco
23
---
x
CW
x
MY

Atlanta
14
---
---
CW
x
---
NBC/MY
Boston
18
---
x
MY
---
---

Phoenix
13
---
---
---
x
MY
NBC
Seattle
16
FOX / MY
---
CW
---
---
NBC/IND
Tampa
14
---
---
CW
x
---
CBS
Detroit
9
---
x
CW
x
---

Minneapolis
10
---
x

x
MY

Miami
16
CW
x
MY
---
---

Denver
16
FOX / CW
x
---
---
---
NBC/MY
Cleveland
12
FOX
---
---
---
---
NBC
Sacramento
11
FOX
x
CW
---
---
ABC
St. Louis
8
FOX / CW
---
---
---
---

Portland
9
CW
---
---
---
---
NBC
Pittsburgh
9
---
x
CW
---
---

Baltimore
8
---
x
---
---
---

Indianapolis
14
FOX / CBS
IND
---
---

San Diego
10
FOX
---
---
---
---
CBS