What are you paying for when you buy TV?


Credit: Shutterstock / Angela Waye

When pay-TV options came out in the 1980s consumers were buying choice: more channels and more options for their prime time or daytime or anytime entertainment. But when the choices are infinite and spread among Facebook (s fb), So You Think You Can Dance and Angry Birds, consumers aren’t demanding choice. In today’s world what am I actually buying when I buy TV packages, be they from a pay-TV provider, Hulu, Amazon on Demand (s amzn) or Netflix (s nflx)?

After thinking about TV in this way, I realize that traditional cable is no longer about choice. It’s about access: We have an abundance of choice but not necessarily what we crave. As an access provider for content, cable has the widest depth of content right now, but it also costs the most. When I thought about what I was actually buying, it shed light on cable’s problems but also led to insights about Netflix, content companies and broadcasters, and it also helped me as a consumer to think about TV in a new way that could help me better spend my money. For example, I don’t have cable, and this reaffirmed that call.

Netflix is for sleeping in

Netflix’s child-friendly interface.

When I buy Netflix, I’m buying the ability to sleep in on weekends. Quite simply, it’s worth it to me to pay $8 per month for a service that contains a bonanza of children’s programming in formats that enable my five-year old to wake up, borrow my iPad and settle in for an extra hour or two of selecting her shows — all without waking me up.

I’m also paying for the shows to be ad-free, although I would say to Netflix that creating some easy way for me to create a kid-safe selection of TV for this use case is important and becomes more so as she grows up.

Buying broadcast

On the other hand, I subscribe to Hulu Plus because that’s my only way to get broadcast TV. I occasionally want to watch broadcast TV but not enough to want to pay $25 for an entire season of a show on Amazon. I can’t receive digital signals inside my home, which frustrates me since those airwaves are considered a public good. Thankfully Hulu and new services such as Aereo are coming to my rescue with my broadcast content.

I even watch ads on Hulu, which is the only place I actually even ever see ads anymore when viewing TV content. Apparently for some programs Web advertising is outstripping its TV counterparts, which may bode well for Hulu and other broadcasters’ Web efforts. March Madness ad spending on Web TV last spring outstripped the advertising spending on live television. Apparently people know where to reach the March Madness demographic, and it’s not on TV. So what does that mean?

Maybe instead of authenticating users for Hulu Plus to make sure they are cable subscribers, the broadcasters should go all-in and embrace the benefits of offering a platform that gives people broadcast TV (and ads) even if they don’t want to buy cable and can’t get broadcast signals. People are willing to pay for it, if Hulu Plus and Aereo are any indication. As for the argument that advertisers currently spend more on “real broadcast TV,” that will change, and fairly quickly is my hunch.

What about sports?

I don’t watch ’em, but my husband does. It’s the thing he misses most about losing access to cable, but so far he still doesn’t think it’s worth it to switch back to paying $85 per month for the service. Instead he shelled out $120 for an MLB Premium pass, and he uses a website to track games that are blacked out. For other sporting events he wanders over to a local sports bar and buys a beer. So now, instead of buying sports, he’s buying an evening out with friends and a game. Unsurprisingly, even though he doesn’t catch every game, he likes the bar better.

So what do the content and cable guys do?

The cable guys are in a tough position. People are lazy and do like choice, but they are also cheap. And the focus today isn’t about choice; it’s about finding the right content on the right device when you want it. That’s a mindset that screams for services like true on-demand networks powered by IPTV where a cable provider can queue up any content for a watcher on demand and on any device.

But technologically cable companies and some other pay-TV providers aren’t there yet, and they are hazy about when they will get there. One reason for this is because it’s tough to do on the backend, but it also has the potential to destroy the geographical monopolies established by physical access lines into the customer’s home.

While they wait, they are pushing hard to create TV Everywhere services that will let customers watch whatever they want within certain restrictions and on particular devices. And they are also trying to keep their content providers from decamping to Netflix or other over-the-top services.

Some of the content guys are undoubtedly realizing that many consumers will still pay for their content even if it doesn’t come from a pay-TV provider. The question is, How much? And when will it make sense for a content company to jump ship and risk alienating a huge source of revenue?

That’s why the Internet is so eager to see HBO Go’s actions, because many believe HBO Go has the largest and best chance to go over the top, thanks to its distribution deals and its quality content. But that argument continues to be debunked, and HBO isn’t interested. Honestly, the entire future of TV is more compelling than some of last season’s dramas.

TV Image courtesy of Shutterstock/Angela Waye


AM van den Hurk

I’m nodding in agreement as I read your article. We are recent cord cutters. We were finding that we were watching only one channel, PBS, and that was just for the kid programming. The rest of the time we watched Netflix, Hulu, and the PBS iPad app. It suits our lifestyle. And I don’t mind paying for it. (I would give my right hand for a BBC iPad app like the PBS app)

Cable really needs to pull their heads out of the sand and evolve with the needs of their customers.

Dan Rayburn

How does cable have their “heads in the sand”? Less than 1% of all TV subscribers have cut the cord, companies like Comcast have ARPU that grows each quarter and even though all the MSOs keep raising rates each year, consumers stick with cable.

For all the talk of how much consumers don’t like their cable bills, they still keep paying it month after month. There is no reason for the cable companies to change their business when consumers aren’t demanding they do so. If only 1% of the market is voting with their wallets and not paying for cable, that’s not enough to get the MSO’s attention.

Jabari H. - Brown

Companies should be ahead of their customers on providing products. This is like the record companies saying everyone is buy CDs in 2002, why would we create an MP3 player and MP3 distribution network? I’m far from an Apple fanboy, but they created something the customers wanted and now dominate the market to the point the the record companies are subservient to them.


I don’t know if you ever checked out Jetflicks? But they are another company out there on android market offering tv shows to watch. They even keep there tv shows up to date.

Richard Bennett

Content creators aren’t going to embrace Internet distribution until there’s a credible program in place to limit piracy. Content costs money to create, and there’s not going to be a free lunch.


Philip Recchia

Dead on as usual, Mrs. Higginbotham. I only hope that TV execs are taking note.


I enjoyed this article- there are lots of cable alternatives out there, and sure, they aren’t right for everybody. The problem is that it is hard to find information that helps you make a decision that is right for you, and many people don’t even know they have options. Consumer awareness gives power to the consumer. I’d like to hear more about cable alternatives and their pros and cons.

Brett Glass

“The widest depth?” This phrase, all by itself, typifies the quality of this author’s work. Also, note that she favors OTT because GigaOm sponsor Google intends to be a player in that market.


“The widest depth” .. describes an infinity pool better than what comes on cable :-)

Nevertheless, I wouldn’t subscribe to the other conclusions you are alluding to. Google and Google TV are not mentioned anywhere (and possibly for good reasons!).


Sports. No offense, but your husband must not be a die-hard of the local sports teams or of college sports. There are no options to stream them yet. And, following a ticker online is crazy. The cost of going to a bar, for me, for those games, far outweighs cable a month. I have tried it, but still the one hook until ESPN3 opens up streaming channels and the antiquated blackout rules change.

Stacey Higginbotham

LOL Thomas, why would I take offense at someone saying my husband isn’t a die-hard sports fan? And you’re right. For many a sports fan, it’s the deal breaker on cutting the cord. I get that.


When I pay for Netflix and when I pay/donate to PBS, I’m gladly buying the absence of commercials for my kids to not watch. Probably not enough to drive the market in any meaningful way, but there are a lot of parents like me.

The irony of course is when I pay a premium price for content when the fam goes to the movies, my kids have to sit through previews which they seem to loathe.

Comments are closed.