Apple’s online TV streaming service may be a shot across the bow of cable companies, but you shouldn’t expect the cable giants to take this threat lying down. CNBC says that Apple will be directly targeting cord cutters with its new TV service this fall, but it correctly notes that cable providers have a lot of tricks up their sleeves to slow down Apple and every other potential online TV streaming service. Below we’ve outlined the three biggest ones and rated how likely cable companies are to get away with them.
First, cable companies will try to limit Apple’s ability to score exclusive content. As Netflix has shown, over-the-top video providers can deliver killer content that will draw in new subscribers. House of Cards, Orange is the New Black and Unbreakable Kimmy Schmidt have all been critical hits for Netflix and have shown that you don’t need a pricey cable subscription to watch great shows.
CNBC writes that “cable companies and content providers are likely to seek agreements that keep Apple from having many exclusive or preferred rights to content, for fear of handing control of their customer relationships to Cupertino.” While this wouldn’t stop Apple’s TV service from being a success, it would at least eliminate the danger that cable companies could face an even more dangerous rival for original shows than Netflix.
In all, it’s very likely cable companies will succeed in pulling this off.
Second, cable companies can try to slap users with data caps. This is something that Comcast and Time Warner Cable have been trying to figure out for a while now, i.e., how to make people accept a data cap system that they absolutely despise.
People hate having data caps on their mobile phones but they’re really, really going to hate having data caps on their home Internet services. No one wants to sit down to watch House of Cards and then receive a warning on their screen that they’re about to get slammed with a $20 fine if they finish the next episode.
That said, cable companies love the idea of data caps for two reasons. One, they want to be able to charge you extra fees. Two, they want to be able to charge content providers money so they can “sponsor” their data to make sure it doesn’t count against the cap. Either way, it’s a shakedown that is too good for most cable companies to resist.
All the same, the backlash against these caps would be so strong that we find it unlikely that cable companies would try it on a mass scale.
Finally: When all else fails, raise prices. Even if you kill off your cable TV subscription completely, there’s a very good chance that you still rely on your cable company for broadband access. And because cable companies have such little competition in the home broadband market, they’ll be able to get away with jacking up broadband prices if too many people cut the cord.
The reason this will likely work is because cable companies have been conditioning consumers for years to expect their monthly cable prices to go up. A major study from the Federal Communications Commission last year found that basic cable prices increased by 6.5% throughout 2012 while expanded basic cable prices rose by 5.1% over the same period. In contrast, the general rate of inflation as measured by the Consumer Price Index throughout 2012 was just 1.6%, meaning that basic cable prices rose at more than four times the rate of inflation in 2012 while expanded basic cable prices rose by more than three times the rate of inflation.
Because consumers expect they’ll always be paying more to their cable providers, we find it impossible to believe that broadband prices won’t get jacked up as cord cutting catches on.