Future of Cable TV

I suspect that the free video services will first delay first run shows longer and longer before making them available for free, the discontinue offering them for free at all.

Eventually the services like hulu will cost as much as cable does now, and all of these A-la cart video services will greatly exceed it.

Quote: Dalex64

Eventually the services like hulu will cost as much as cable does now, and all of these A-la cart video services will greatly exceed it.

I don't think that is true.

ESPN is the most successful single network in the country now. They get about $6 per household, but they get it from 99 million households. They also make about $3 in household in advertising and in incidental sales. Maybe another dollar from the secondary ESPN channels.

Disney's significant cable networks and our ownership percentage and estimated subscribers as of September 28, 2013 are set forth in the following table:
Estimated Subscribers
ESPN 99
ESPN2 99
ESPNEWS 76
ESPN Classic 31
ESPNU 76

Disney Channels Worldwide
Disney Channel - Domestic 99
Disney Channels – International 172
Disney Junior – Domestic 63
Disney Junior – International 97
Disney XD - Domestic 82
Disney XD – International 106
ABC Family 98
SOAPnet 67

A&E Television Networks (AETN)
A&E 100
Lifetime 100
HISTORY 99
LMN 85
BIO 69
H2 70
Lifetime Real Women 16

Now they are not going to reveal affiliate fees on a network by network basis. But they do reveal their revenue cut in two different ways:

Revenues
Affiliate Fees $ 9,360
Advertising $7,699
Other $2,377
Total revenues $19,436

Revenues
Cable Networks $13,621
Broadcasting $5,815
Total revenues $19,436

So $13,621 divided by 100 million households is $136.21 or $11.35 per month per household. That's only an approximation since only the major networks have 100 million customers.

So if Disney is currently getting $11 to $12 per household for all of it's cable channels, it is unlikely that HULU plus will rise far above it's $8 month asking price. It might go up a dollar a year, but it's not going to jump to $30/ month
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Netflix is going to make big money by dividing it's audience up into individuals instead of households. The majority of people who buy Netflix buy it for$8.99 month

Netflix Plans and Prices Netflix Pricing Levels as of May 25, 2014:
Netflix Streaming Plans
1 SD Screen - $7.99 a month
2 HD Screens - $8.99 a month - up to 2 Screens streaming simultaneously
4 HD Screens - $11.99 a month - up to 4 Screens streaming simultaneously

Although in Netflix you can keep individual profiles, the owner of the account can see what everyone else watched. Although there is no pornography on Netflix, kids and wives are still going to resent the loss of privacy. As viewing media becomes more and more an individual activity instead of a group or family activity, the demand will increase for individuals to have private accounts.

Netflix is going to make a lot more revenue by selling accounts to individuals for $9/month than it would by increasing their price to $20 and losing a big portion of their customers.

Quote: Evenbob

Not quite profit. They have all the overhead
of running a business, like thousands of
employees, thousands of miles of cable
and infrastructure. I'm guessing a very small
part of that 60 is actual profit.

If Comcast has enough piles of cash lying around that they can afford to purchase NBC and Universal Studios and then make a bid for Time Warner Cable, that probably means that Comcast has astronomical profits.

But it depends on your defition of profit. Net profit margin of Comcast was 12.30% while gross profit margin was 69.40%.

According to a study by Ernst & Young, in 2010 cable operators generated high profit margins of 38 percent while cable networks had margins of 31 percent. The study used EBITDA divided by revenue for its profit margin calculation. EBITDA -- earnings before interest, taxes, depreciation and amortization -- is a cash flow-based profitability measure. Value Line published another study basing its average on 20 firms. EBITDA-based profit margins dropped for the sector as a whole to 33.4 percent as of January 2013.

It's pretty obvious that Comcast's broadband internet division is more profitable (70 percent) than their cable-TV division.

It's an obscenely lucrative business, and it's probably in Comcast's long term interests to lower their cocaine prices to prevent their junkies from kicking the habit, but it's hard for any drug dealer to turn down free money.

Quote: Evenbob

Any profit they make goes back into the company anyway.

I've looked at a lot of books. A lot of profit makes it into executive bonuses. You almost never read that bonuses weren't given because times were good and the company was just riding the wave. You only ever read that profits were low because nothing executives could do would overcome the bad economy.

Quote: reno

It's an obscenely lucrative business, and it's probably in Comcast's long term interests to lower their cocaine prices to prevent their junkies from kicking the habit, but it's hard for any drug dealer to turn down free money.

When CEO Michael Eisner of Disney purchased Capital Cities/ABC in 1995 the financial story at the time was the Disney had acquired ABC, the station where on October 27, 1954 The Wonderful world of Disney debuted. But, in 1984, ABC reached a deal with Getty Oil to acquire ESPN which had just begun broadcasting in September 1979. In 2006 Monday Night Football moved to ESPN.

According to analyst firm Wunderlich Securities, ESPN alone is worth $50.8 billion -- or roughly 33% of Disney's total valuation.

As the owner of the most valuable cable network Disney may profit from distributing and selling itself over the top as a streaming media service. Of course, it lacks a channel with zombies, vampires or any violent programming.

ABC
ABC Family
Live Well Network
A+E Networks (50%)
Disney Channels Worldwide
Disney Television Animation
ESPN Inc. (80%)
Hulu (32%)

Disney owns Hulu? It sucks, I can never find
anything there worth watching. If they do
have a decent series, it's only 1 season
or a few episodes. I spend most of my time
there looking for something to watch.
Netflix it ain't.

Quote: Evenbob

Disney owns Hulu?

By 1981, TCI (Tele-Communications, Inc.) which had gone public in 1971, had become the largest cable company in the United States. They were threatening to remove network television from their lineups in favor of networks that they had a financial stake in. Although you could switch back and forth from an antenna to cable,the Fcc enacted "must carry" rules to require that the network signal be retransmitted on cable.

In only a decade the networks went from being concerned about being dropped from lineups to being jealous of the fees that cable operators were paying to cable networks. In 1992 the Fcc issued new regulations allowing the broadcast networks to negotiate a fee for retransmission of their signal. Cable operators widely refused to pay cash for a signal that was free over the air, so the networks settled for other compensation. ABC only would give retransmission consent if the cable operators agreed to pay a fee and carry ESPN2.

Today all of the broadcast networks are pursuing considerably higher fees for their signal, with CBS being the most ardent. ABC has managed to settle on fees out of the public spotlight, so they are not asking as much.

Hulu is owned by:
32% Disney–ABC Television Group (32%)
32% Comcast which owns NBC
36% Fox Broadcasting Company (21st Century Fox)

Since all three corporations are getting their major revenue from cable, they don't want to upset the bandwagon. So they limit the number of episodes on hulu, and bring in other restrictions so that they don't encourage people to drop cable TV. Original programming on Hulu is mostly cheap crap.

Netflix on the other hand , has no financial interest in linear Cable TV. They have nothing to protect, so they spend more on original series, and they simply try to get all the episodes they can afford.

Right now popular TV shows like Marvel's Agents of S.H.I.E.L.D. 2013 are leased to Netflix as well as Hulu, but that is probably because Disney wants to build up the fan base as much as possible. In the future they may not license their show to Netflix.

Hulu is a waste of time. Amazon is a little
better but not much. Prime is not Netflix
by a long shot. I can find better full
length movies on Youtube.

Quote: Evenbob

Hulu is a waste of time. Amazon is a little
better but not much. Prime is not Netflix
by a long shot. I can find better full
length movies on Youtube.

I had Hulu Plus and switched to Netflix, the latter being far better. I will soon pick up Hulu for a month to binge "Bar Rescue" and a few other shows. Then I will drop it again.

Quote: Pacomartin

Right now popular TV shows like Marvel's Agents of S.H.I.E.L.D. 2013 are leased to Netflix as well as Hulu, but that is probably because Disney wants to build up the fan base as much as possible. In the future they may not license their show to Netflix.

Without the fan base, who is there to pay licensing fees? Its the fan base that watches the show's ads or pays for an ad-free service of some sort.

Sure a quality show will help but where is there any quality out there?