Why TV is doomed: HBO Now and the new cord-cutting economics

The entire old-school television distribution system has been rocked by a quake of epic magnitude. Now I can watch whatever I want -- and save hundreds of dollars a year.
Written by David Gewirtz, Senior Contributing Editor

This article is taking me a lot longer to write because it feels like an entirely new world of TV-watching has opened up and -- frankly -- I'd rather wallow in all the new programming than write this article.

But I'm a professional, so article writing it shall be. Besides, despite all the shows now within a click of the remote, I really don't have time to watch more than one show (at most) a day.

While I want to binge-watch the entire first season of Treehouse Masters on Hulu Plus, this is a much bigger story than just my decision to return a couple of tuner boxes and cable cards to Bright House.

The entire old-school television distribution system has been rocked by a quake of epic magnitude.

And, as has been the case for the past decade or so, this seismic shift is all about high-speed broadband, the Internet, and the cloud.

Ground zero: HBO Now.

Until now, if you wanted to watch Game of Thrones or any of the other excellent HBO series, you had to have a cable or satellite TV subscription. You had to be tied to a monthly fee consisting of a suite of services you didn't want, just to watch a few things you did.

In fact, that was a lot of how the world worked before the Internet. Vendors sent catalogs and that was how you found out about stuff. TV was appointment only. Consumers consumed, but never selected. Magazines and newspapers were periodical and if you didn't stockpile old copies, you might never get to see an article you hadn't gotten as part of your subscription.

But, of course, the Internet changed all that. Now we reach out and consume what we need on demand. We go to the Web sites we want, we watch the YouTube videos we want, we watch the Netflix streamed programming we want - what we want, when we want it. That's how the Internet works.

That's not how cable TV works. Which is why cable TV is on the cusp of some very painful changes. Let's use my case as an example. I'm not the average TV watcher, but no one is really average anymore.

Since I left home as a young adult, I have never watched appointment TV. I was never home when the shows I liked came on. As early as the mid-1980s, I time-shifted my shows using very kludgy VCR programming and I had a stack of tapes I swapped each day living on top of my TV. If I wanted to watch the good stuff, I had to record it.

As a result, I worked my way through a series of devices, from VideoGuide to WebTV to TiVo. I've had one or more TiVo boxes since 1999. TiVo converted the TV that streamed from the cable service into an on-demand experience by storing pre-selected programs on the TiVo hard drive. That way, when I was able to watch TV at 3 or 4am, I could watch some good shows.

But that model changed -- a lot -- with Netflix and then Amazon Prime streaming services. With Netflix, you can choose from thousands of programs in their library and watch them on-demand and at any time. If you're willing to pay a few bucks per show, you can also pay iTunes and select from thousands more shows. Add Hulu's randomness into the mix and you have thousands of additional shows you can watch.

But not Game of Thrones. To watch Game of Thrones and the History Channel and CNN, you needed to get a cable TV subscription. If you spend a lot of time watching TV, it makes sense. But if you're like my wife and I, that cable TV subscription is a huge waste of money.

We watch, maybe, six hours of TV a week. We usually watch one show from one end to another (we watched Boardwalk Empire, Continuum, Downton Abbey, and now we're on Once Upon a Time). Every few nights, we'll watch the next hour of the show.

We don't need 20 sports channels and 15 home shopping channels. We frankly don't even need the major networks, because we generally wait until the show has completed full seasons before watching them. We bought some DVD sets to watch some earlier series, even before Netflix streaming became practical.

For a few years now, my wife has questioned why we pay so much for TV. I didn't want to give up the shows on History Channel, and I watch the election returns on CNN (mostly because I can't resist the weird holographic gimmicks they create for each election). But we're a full year away from any good election night returns, the History Channel has declined in quality to the point that I don't care all that much, and we just don't watch that much TV.

But, oh, how much we have been paying. Here's what we paid last month:

  • $247.85 for Bright House Premium TV (most channels, plus the main movie channels) w/Lightning 150 Internet service
  • $32.98 for TiVo service for our two TiVos. That wasn't for programming, but merely the updated TV listings needed by the TiVo boxes
  • $39.96 for Netflix for two streaming accounts and two DVD accounts
  • $79/year for Amazon Prime (used mostly for package shipments, not video)

All told that amounted to $327.37 each month. That's a lot of money for TV. To be fair, however, I use the relatively expensive Internet service for work and we use Prime mostly for non-entertainment purposes, so let's drop those two out of the budget. That still leaves our monthly TV budget at $204. That's $2,457 a year. For TV.

It doesn't make sense, especially given our style of one-program-at-a-time TV watching.

This month, we decided to cut the cord. We looked at what we're really using and decided to optimize for that. For example, we use the heck out of streaming Netflix, but often have the DVD movies sitting here for months at a time until we get around to watching them. That's a waste of money and a pain to manage. So we consolidated Netflix from $36.96 to $7.99.

We've been paying TiVo $32.98 for listing services, month after month, year after year. Every two years, the TiVo boxes die, and we've found we've had to replace them. I actually bought lifetime TiVo services for a few boxes, but since the boxes didn't last long and TiVo wouldn't move the lifetime service to a new box, it was a waste of money. If we cancel our cable service, we can cancel our TiVo service. That's another $32.98 in my family's pocket.

And then there's the big kahuna of the cable bill. Of the $247.85 we paid monthly, Internet is still $116 (and that's that high because I need bandwidth for work). But we still dropped $131.85.

And then we added a few services. For $15/mo, we added HBO Now. Game of Thrones, here we come. And I also added Hulu Plus. Hulu Plus is kind of stupid in that you never really know what you're going to get, but if you want a large selection of current shows, it's an easy way to go for $7.99/mo.

So what's the tally? We traded a $204/mo entertainment bill for about a $30/mo entertainment bill. With the remaining $174/mo, if we want to pay to rent a movie or buy a series, it's not an issue at all. We're still saving hundreds of dollars.

And this is where the cable TV model is about to be destroyed. Because if you want to watch an entire season of a series, you can buy it for roughly 20 bucks. That's a fraction of your monthly cable bill, and you watch what you want to watch.

And that's why I found myself staring at a cornucopia of entertainment options this morning. Rather than the same programs sitting on my old TiVo, I had the entire Internet of video to choose from. Rather than being forced to watch what comes down from my cable provider on their schedule (with their blackouts and whacked-out DRM that won't let me watch a show I recorded in the living room on my bedroom TV), I can watch whatever I want.

I can watch whatever I want and save more than $2,000 a year at the same time.

The old-school television model is doomed. Content producers and distributors better come up to speed quickly on the new world order or they will be decimated by the price/performance benefit of the now available substitute solutions.

Excuse me, but I have to go. I have another back-episode of Treehouse Masters I need to watch on Hulu.

By the way, I'm doing more updates on Twitter and Facebook than ever before. Be sure to follow me on Twitter at @DavidGewirtz and on Facebook at Facebook.com/DavidGewirtz.

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