TV Everywhere Is All Hype: Comcast Raising Rates To Pay For “Free” Service

For the past two years now, many in the online video industry have been falling all over themselves to hype TV Everywhere services and preach about how they are the future of the broadcast industry. But beyond all the hype, the fact remains that Comcast, who is the only major MSO to even offer such a service in the U.S., has stated that they lose money with Fancast Xfinity TV and don't know how they will turn it into a profitable business.

So it comes as no surprise to me that over the weekend, Comcast announced that for the second time in less than a year, they are raising rates. Starting on August 1st, customers in some areas of California and Pennsylvania will see their rates go up 3.5%. Comcast has been quoted as saying the rate increases are as a result of, "new technology, new features, additional programming, higher broadband speeds and improved customer service." In other interviews, they have said the increase is to pay for "digital services" and someone I spoke with at Comcast, who didn't want to be quoted for the blog, said the rate increases are helping to offset the costs associated with their Xfinity streaming service amongst other digital products.

For many customers, this is the second rate increase in less than a year as Comcast previously raised rates across the board on April 1st for what they said was, "part of our commitment to provide you with the very best entertainment and communications experience." And six months before that, in the fall, they raised rates again. While raising rates is something the MSOs have always done, no one that I have seen does it as often as Comcast. And with the Fancast Xfinity TV offering, all it does it give them an excuse as to why they have to raise the rates, telling customers that the service has value, even if many customers don't agree. While Comcast is quick to point out that they need to raise rates to pay for "better" services for consumers, it should also be noted that last quarter Comcast's operating income was $1.9 billion.

For those that think TV Everywhere is the future, it's not. In the U.S. at least, consumers are not willing to pay for the service, in the current state, and cable companies can't afford to offer a so called "free" service that they lose money on. If MSOs offered real TV Everywhere services that allowed for linear programming viewable to multiple devices, then consumers would pay for it. But no MSO is going to offer that as it then competes with their core business. The entire reason why Comcast doesn't charge a monthly fee for Fancast Xfinity TV is because they know they won't get enough people to pay to cover the cost of the service. So instead, they raise rates even for those who don't even use the service as they have no other way to try and get their money back.

Is this the kind of service and business model that the industry should be getting all excited about? Absolutely not. As I've written before, TV Everywhere is a pipe dream, something that people speak of without looking at reality, refusing to give up hope that it can save the broadcast industry. The first problem for someone who thinks this is that they are under the false impression that the broadcast industry needs to be saved. It doesn't. For all the talk about how great TV Everywhere is going to be, online video services are never going to replace cable and will always be a compliment to TV.

Another problem with TV Everywhere is the fact that there aren't enough large MSOs in the U.S. to make an entire business out of the service. Last year, the top 25 MSOs in the U.S. had a combined total of 60+M subscribers. Of that number, the top three MSOs combined, Comcast, Time Warner and Cox, made up 70% of those subscribers. Seventeen of the top 25 MSOs have less than 1M subscribers each. Looking at those numbers, it's clear that very few MSOs are going to be in a position to offer TV Everywhere services. There is no incentive for a MSO with 300,000 subscribers to bring to the market any type of TV Everywhere offering.

While I can understand that people want to get excited about new technology, there is nothing new about the technology used for TV Everywhere type services. It's the same online video technology we've had for years, re-packaged into a business model that does not and will not work. When I hear people say things like "TV Everywhere is disrupting the traditional business model," that's simply their way of trying to sound hip, kind of like how everyone used to drop the word "convergence" into as many sentences as possible. The reality is that TV Everywhere isn't disrupting anything. When most people write about the topic they seem to always focus on the technology used or the authentication process and not about the business model, because one does not exist.

The true value of any service is whether or not people are willing to pay for it. I'm sure Comcast would argue how popular Fancast Xfinity is by providing all kinds of data on how many number of streams have been served or how many hours of videos people have watched, but that means absolutely nothing. If the service was so popular and considered valuable, then consumers would pay for it and it would be a profitable business, but that's not going to happen with TV Everywhere.

Related Posts:

- Some Industry Vendors Betting Big On TV Everywhere, Most Will Lose

- The Promise Of TV Everywhere Is Doomed For Failure, Here's Why

- TV Everywhere Offerings Will Struggle To Be Successful

- Internet Video Distribution Will Not Displace Cable TV: "Cord Cutting" Is Hype

- Cable Companies Hyping Over-The-Top Video, But Where's The Business Model?

- TV Everywhere: The Future of Television, or Another Over-Hyped Promise?

  • Rumor Has It

    …that Hulu is white labeling for MSOs which if true does accelerate the validity and technical feasibility of TV Everywhere. Any news on that?

  • http://www.BusinessOfVideo.com Dan Rayburn

    I don’t know how accurate that rumor is, but even if it comes true, to me, that’s not TV Everywhere. TV Everywhere was suppose to be a service from the MSOs, delivered over their own internal network, with deals they cut with the content owners. Hulu Plus isn’t that and Hulu Plus is limited in their inventory.
    It would be like the MSOs cutting a deal with EPIX so that you can watch movies on your computer. That’s nice, but it’s not TV Everywhere and it’s not controlled in any way by the MSO.

  • http://profile.typepad.com/brian49 brian cavanaugh

    I think this article should be retitled to TV Everywhere from MSOs is all hype… I think we all know that the major MSOs would like to continue with the business model that has made them rich over the years. The introduction of an ITV service (as limited as it may be) is just a ploy to keep customers from bailing entirely and going to the internet for their tv. MSOs are not in ITV to make money, they are in it to stem any loses from customers jumping ship.
    Now another big player from outside of the old boys club (a Google let’s say), they can take ITV or TV Everywhere to the next level-not all hype. I guess we will see in a year or two how that plays out…

  • Rumor Has It

    @Dan:
    If Hulu is white labeling they could get cable content via the agreements you mentioned.
    But your description is still correct- having Hulu manage the backend isn’t the original TVE concept HOWEVER it is a smarter strategy. Why should every-single-MSO re-invent the wheel on TVE? Similar to other cable technologies, the more standardization the better for all parties involved as it significant drives down costs due to repeatability.

  • VML26

    Comcast investing in a business that doesn’t make a stand alone profit today doesn’t necessarily indicate that it thinks it will never make a stand alone profit, does it? On the contrary, this seems like evidence that Comcast might think this is going to be a viable business at some point in the future? Or maybe it is evidence that their current business model has a challenging future? Maybe they are using price hikes to existing subscribers to help them fund additional content acquisitions, because the existing model is being challenged by TV Everywhere? I just don’t agree with the conclusion that a business that isn’t making a profit today, will never make a profit (obviously).
    Also, didn’t convergence happen? I understand it was a trendy word to use at the time, but what’s the growth in stand alone GPS devices, flip cameras, ipods, PDA’s, e-readers, etc relative to smartphones? Many of the people uttering ideas about convergence may have been on to something… even if it wasn’t a unique opinion or a particularly timely observatio.

  • http://www.BusinessOfVideo.com Dan Rayburn

    I would disagree that “convergence” ever truly happened. When it comes to video, all we have is fragmentation. There is no default video codec, platform, player, bitrate, etc. and we have tons of devices, lots of TV platforms, yet most of the content can’t be played from one device to another. Content is tied down to specific platforms or devices with no true convergence taking place.
    In 1998 Microsoft introduced WebTV which was suppose to bring the Internet and TV together. Twelve years later, people are getting excited over Google TV, yet the product is not even on the market yet. So I’d say we’re still in this cycle talking about convergence, but it has not happened for video.

  • Anthony

    Dan,
    What about Microsoft’s most recent technology the Microsoft Mediaroom? On the website they boast a scalable and cost effective way for MSOs to deliver TV Everywhere.

  • http://www.BusinessOfVideo.com Dan Rayburn

    Yes, we have seen Microsoft really push the benefits of Mediaroom, but so far, nearly all of the adoption of their platform has been outside the U.S.
    But the real problem anyway it the business model and content for TV Everywhere and that’s not something Mediaroom solves. TV Everywhere is not a technology problem, it’s a business one.

  • Anthony

    Dan,
    I agree that TV Everywhere as a stand alone service holds no water, and thus cannot be charged separately. However, what if a smaller MSO uses TV Everywhere to expand its value proposition to subscribers, and as a result increases its number of subs thus increasing revenue.
    Prices can be maintained as long as the revenue from new subs is greater than the price of mediaroom. I’m not sure how much the mediaroom costs, but their website makes one think this business case works.

  • http://www.hos.com Stephen Hill

    Seems to me that the MSO that is best postioned to offer something like this is DirecTV.
    They already have all the content, the satellite covers the entire country, all they need is a ‘last-mile’ deal with one of the mobile carriers to get the video to portable devices. They’ve been trying to differentiate themselves based on free service deals and HD, why not TVE?

  • Phil the Stream Direct Guy

    More than likely Comcast will lose when Google TV hits the market. Increasing rates is a big turn-off, especially in today’s economy.
    Let’s see what happens when Google TV closes the gap on television and the Internet, where viewers can use their TVs to surf the Internet and find all kinds of content, including 1000s of free worldwide TV channels, sports, news, movies, TV shows/episodes, and the list goes on.

  • http://www.madbohem.com madbohem

    You are so right about this being hype. Comcast is stuck finding itself in the middle with a service that is quickly becoming redundant.
    TV Everywhere same old cable plan

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  • bc

    I bet their subscription rates will significantly drop down once they take out the free service. The bosses should think of a gimmick for the people to buy subscription.