What is a “zero TV home”? And what does it mean for the Australian NBN debate? More and more American homes are switching off free-to-air and or cable (pay) TV and exclusively consuming visual media via their computers, tablets and smartphones, not to mention gaming machines. The latest estimate reckons there are around 5 million such homes in the US, more than double the number of five or six years ago.
While Australia is a long way from this situation, there are growing reports of zero TV houses among younger demographics, who are also have led the way in abandoning copper wire landlines and going “naked” with broadband/mobile only. Abandoning pay TV in Australia would send a nasty shock through the local media industry (free-to-air TV would be OK because the majority of viewers still get it over the airwaves and not through their cable channels). The NBN could very well increase the number of zero TV homes in Australia, just as faster and faster broadband speeds have played a part in the US, along with the Apple-driven smartphone and tablet revolutions.
But TV seems to have been ignored in the NBN debate in Australia. Malcolm Turnbull said this week (according to yesterday’s Crikey):
“The greatest uncertainty overhanging investment in next‐generation fixed networks is not over costs, despite the mystery that surrounds NBN Co’s refusal to be open about the full capex cost per premise of its rollout. It is over revenue and user demand; nobody knows what applications may emerge to use the bandwidth that fibre provides, or what value consumers might place on them. At the moment the only answer to this quest for a ‘killer app’ for fibre is more and better television. In markets such as the US, where cable TV subscriptions are an embedded part of consumer behaviour, this may tip the scales in favour of investment. But relying on TV in addition to broadband and voice to drive revenues is less persuasive in Australia, where subscription TV penetration is lower.”
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In the US, streaming video (from the likes of Netflix and Amazon) has been a driver to the rapid upgrade of broadband speeds by the telco giants. They have also been spending heavily because their basic copper wire-based phone services are dying. Big cable companies, such as Comcast, have decided to match them by upgrading their offerings and services. And the key point in all of this has been faster and faster broadband speeds, not static or half choke.
“The appearance of zero TV homes in Australia would send a tremor through Foxtel in particular and the spin-off of the new News Corporation later this year.”
The number of TV-free homes in the US has jumped to 5 million in 2013 from 2 million five years ago. Many of those abandoning conventional TV have done so because cable costs have topped $US100 a month, which in a country where unemployment is at 7.6% and wages growth averages less than 2% a year has become a dispensable cost. US research firm SNL Kagan says around 100 million homes, or 84.7% of all US households, have cable or free-to-air TV services. But that’s down from the peak of 87.3% in early 2010. Nielsen estimates that 67% of the 5 million homes without TVs do watch video content, with 37% doing so on a computer, 16% via the internet, 8% on smartphones and 6% on tablets. The remainder presumably don’t watch anything.
There are an estimated 130 services streaming TV content to mobile devices across the US, with newcomer Aereo taking on Apple and Netflix. Aereo has raised the hackles of the free-to-air networks because it uses tiny antennas to capture broadcasters’ over-the-air signals and then streams them to local subscribers. It does so without TV stations’ permission, and without paying them any money or subscription fees. Broadcasters say that violates their copyright and last week lost a case in New York on that argument. It is headed for appeal, but already News Corp’s Chase Carey has warned that the company could convert its Fox free-to-air channels across the US into cable channels and add them to its existing offerings. Ironically Aereo is backed Barry Diller, the man who started Fox TV for Rupert Murdoch more than 25 years ago.
In an anti-trust legal action, one of America’s biggest cable companies, Cablevision, is challenging the ways cable providers such as Viacom force cable companies to take less popular channels as a part of getting the rights to popular channels. And the giant Verizon telecommunications group has proposed changing the way it pays the channel providers from a blanket set fee per subscriber to one based on the actual number of people watching each channel. Verizon is in effect trying to “unbundle” cable channel offerings, while Cablevision is seeking something similar, but from a different direction.
Don’t expect those challenges to happen here because of the way Foxtel and News Ltd have been allowed to dominate subscription TV in this country. They don’t like competition.
But even Foxtel and News are under pressure as Foxtel’s subscription numbers have barely risen in the year since the Austar takeover. The huge and expensive AFL contract has been slow to lift subscriptions. Foxtel has been forced to restructure the cost and nature of its subscription packages by cutting the number of channels and the starting prices, and offering free installation and between one and six free months. The appearance of zero TV homes in Australia would send a tremor through Foxtel in particular and the spin-off of the new News Corporation later this year.