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Summary:

Pay TV providers tend to argue that cord cutting doesn’t exist. Dish Chairman Charlie Ergen doesn’t agree.

charlie ergen feature art

Cord cutting is real, argued Charlie Ergen, Chairman and co-founder of Dish Network at All Things Digital’s Dive into Media conference in Dana Point, California Monday. “think people are cutting the cord,” Ergen said, arguing that kids in college never use cable, and that they won’t suddenly start paying once they leave school. “There is a reason that tobacco companies give away free cigarettes at colleges,” he joked.

Ergen also reiterated his position that a la carte programming would be better for consumers, as well as the industry itself. “We are still for a la carte, because the Internet is a la carte today,” he said. People could just watch Netflix, or even pirate content online, and service providers would have to compete with this new reality. “A lot of customers can live with Netflix and an… antenna, and YouTube…  and they’d be pretty happy,” he said.

However, Ergen cautioned the audience at Dive into Media that a la carte won’t become a reality anytime soon. “It’s gonna go there slowly,” he said, arguing that the major broadcasters won’t break the bundle willingly. It would be more likely that the bundle would be broken by outside forces like Amazon and Netflix.

Speaking of Netflix: Ergen was quite bullish when asked about the future of the video service. “I think they will be successful,” he said, adding that the launch of Netflix’s first original series House of Cards was “brilliant.”

He said that it would be possible for both Amazon and Netflix to succeed with their respective services – but it was quite clear that Ergen is rooting for Netflix: “I’m a fan,” he said, adding: “I feel stupid that we didn’t think of it first, but I’m a fan.”

  1. Reblogged this on Tim Chambers and commented:
    A trend that over time will go from “news when it is admitted” to undeniable faster than anyone thinks….

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    1. so, how fast do you think it will happen (whatever it is)>>> ?

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      1. My hunch is that Neflix, iTunes, and the other online TV efforts which by their very nature are a la carte, will bring more pressure faster than expected for this cherished business model to break. I would be surprised if within 24 months you don’t see the serious cracks forming and some major cable networks start to break away from the pure bundled model…

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  2. Jason Scherbel Monday, February 11, 2013

    Fix the grammar/typos.

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  3. If the cable company provided a la carte programming, I would have remained a customer. They didn’t, and now streaming gets my business, and I get the savings. Without commercials.

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    1. thank you, sample of one

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  4. I’m a “cord never” – I’ve not had a pay TV subscription since 1992, so it’s safe to say that I don’t have a relationship with the video side of the cable industry.

    I am also pretty sure I spend MORE each month on my combination of media subscriptions/rentals and purchases from Netflix/Apple/Amazon/Vudu than I would on a cable TV package.

    It’s not a matter of cost for me, it’s a matter of the media habits and expectations I have. I don’t care about sports, and I don’t care about other live programming, so those are two areas that the MVPD’s can’t capture my money. However, I will pay for a complete season of Dr. Who ($28 for all of all of season 7) or Portlandia ($26 for season 3) on Apple’s iTunes – but if just ONE of these MVPD’s offered the depth of catalog and flexibility of playback that I get with the OTT providers, I’d probably subscribe.

    But the MVPD’s have insane content deals that do things like “expire” on-demand access to past shows (what? WHAT?), limit the ability to access content out-of-home (which Dish inelegantly gets around by using your in-home upstream bandwith to stream from your home instead of their own media head-end and force you to subsidize ESPN and the other 200 channels you never watch because they think nobody will spend $30 for a season of one show.

    Dish, for all of their evil and nasty, at least understands the reality of the business and realizes that their entire multi-billion dollar “antenna in the sky” infrastructure is seen as nothing more than a DVR filler by more and more people, and they are facing a cultural shift as the boomers start to die off and the next generation, a market that sees a lack of “on-demand” access to media as “broken.”

    The other thing that Dish is saying openly is that ad-supported television (despite being the overwhelmingly dominant business model) is at risk, and they are OK with that. That’s really the big deal in this story…they are definitively stating that they want to kill commercials. Those of us who have been OTT all along know what that’s like – it’s nice.

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    1. OTT has commercials too, or a sub fee – nothing good will be free

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  5. I have never paid for cable as an adult. I’ve always just had an antenna! Netflix streaming is the best thing to happen to TV ever :)

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  6. Been predicting this for over 3 years. OTT / cord cutting is real and an excellent alternative to traditional pay TV (with linear and its current VOD offerings). When Ergen is right when he says: “A lot of customers can live with Netflix and an… antenna, and YouTube… and they’d be pretty happy,” . . . only he is missing the point that many customers are already happy with this arrangement (whether they are cord cutters or cord nevers).

    For those who think we can’t learn from history, we had an almost identical cord cutting argument raging in the late 1990’s / early 2000’s. Back then the topic was abandoning landline phones for mobile (or cable telephony service). I tracked the numbers and the landlines in the US peaked in 2000 and declined slowly in the first few years (less than 1% per year initially) and then accelerated. It took 5 years of consistent declines before the telcos finally admitted cord cutting was real and landline subscribers were in a permanent state of decline.

    If you track video subscribers in the US, you will see a strikingly similar pattern of subscriber loss. If the pay TV industry is true to form, it will 2 more years before they acknowledge that cord cutting is affecting their business.

    I have the excel spreadsheet and chart if anyone is interested.

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    1. I still believe if enough people “cut the cord” and stop getting TV from their cable company, the cable companies will just raise the price of Internet access.

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    2. over three years? not bad. hang in there, you will eventually be right. about 95 million more households to go…..

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  7. How to square Ergen’s supposition that “kids in college never use cable” with Nielsen’s data that shows that more than 95% actually do watch cable? Can PaidContent check into this?

    http://blog.nielsen.com/nielsenwire/consumer/does-college-play-a-role-in-media-consumption/

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    1. Only says that 95% have cable TV access. Not that they watch it. Big difference.

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      1. dumbest answer ever,,,

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    2. Kevin Horne – Did you download the full report? The summary at the URL you posted talks about how Nielsen classifies students in 5 categories. The “95%” number applies to two of those categories (Primary and extended home students). What percentage of students are made up of those two categories? I will guess that Primary Home students (live at parents home, commute to school) are a small percent. Extended home students (live at school during the school year,, back at parents home on break) could be a relatively high percentage among first and second year students, but lower in the 3rd year and beyond. The % these two categories make up of all 18 -24 year olds is important to this argument.

      Even if these two categories of kids make up a significant % , it is questionable as to if they will translate into paying cable customers in the future. There are good odds that the Primary Home Students completely ride the parents cable dime. There are decent odds that the Extended Home students only watch cable at their parents house over the summer, or in the community tv or shared dorm room.

      When I was in school ( a fairly affluent private school ) and cable was actually affordable, my *guess* was that far less than half of on campus students (on campus students were 95% of the campus population). There was really too much work/studying to do for some, drinking and flirting for others, to do.

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  8. cord cutting IS real. I did it a few years ago. I use an ota antenna (mohu) and frequently use my Roku. Al a carte is great, watching what I want when I want. I subscribe to Netflix and Amazon Prime which allows for so much content between the two, there is always something on. The kids love it too. I now need to add another Roku. I’ve even converted a couple of friends and co workers. One is cutting cable this month.

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  9. wow – there’s another two (or three) cord cutters for ya…95 million more to go….

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    1. Dear Kevin Horne,

      Rather than counting individuals, you should focus on the ratio. What percentage of the commenters cut the cable?? Add me to the list as I cut the cord 3 years ago and never looked back. I have 110$ more in my pocket every month.

      House of Cards is really the start of a revolution. When Netflix and Amazon have original content that rivals the cable content, more and more will cut the cable.

      Netflix is becoming more like HBO and Showtime, but without the cable tv subscription requirement.

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  10. OK – you do the math. you and your two friends divided by 95 million = what % ?

    PS House of Cards. Have you thought about Netflix’s (lack of) business model for it? I have.
    All “revolutions” need to be funded. House of cards indeed…

    http://lairigmarketing.typepad.com/lairig_marketing/2013/02/netflix-deals-a-full-house-of-cards.html

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