Cord-cutting accelerates as business of TV adapts

TV watching is bowing to the technology of the Internet.

Americans dropped cable and satellite TV subscriptions at the fastest rate ever during the first three months of the year, new data showed last week, as viewing habits get shaken up in a manner last seen during the emergence of cable four decades ago. Consumers are increasingly turning to video streaming services delivered via the Internet and grabbing some channels with antennas just as they did before cable. As a result, they're taking greater control over when they watch something and paying less for it.

Karen Kirchberg of Champlin is too busy taxiing her daughters around to school and other events to watch much TV. "Since 2009, I've been growing more irritated with cable and what I was getting for $100 a month," she said.

Over the past five years, 3.8 million homes in the U.S. have canceled or refused cable. It's a decline brought on partly by young adults who watch video on tablets, phones and Internet TV instead of paying a monthly cable bill.

Some don't want to pay for hundreds of channels even though the average family watches only 17.

The change is reshaping the cable industry, with providers starting to count on the growth of broadband Internet service to offset the delivery of huge bundles of TV channels.

New Internet TV services such as Sling, HBO Plus and Sony Vue recently emerged to compete with Netflix and Hulu Plus in streaming video as it happens or on-demand to consumers.

And entrepreneurs in the Twin Cities and elsewhere are setting up businesses that assist people who want to break from cable and satellite without losing access to their favorite shows.

John Brillhart of Fridley started Cable Alternatives late last year and has helped more than 120 people so far with the change, including Kirchberg.

Brillhart asked Kirchberg, as he does all his customers, to identify which shows she and her daughters watch. Shows from HGTV, the Food Network, Disney, Own and the local 10 p.m. news were on the list.

Brillhart found all of the shows the Kirchberg family wanted through Netflix except those from Own, the Oprah Winfrey network that is only distributed via cable. "I told him that I couldn't lose Oprah, but I got over it," Kirchberg said.

Brillhart added a digital antenna for local stations and a TiVo box for recording and Netflix access. The result: The Kirchbergs' monthly TV bill fell by half.

Jeri Borgwarth of Andover saw even larger savings. She was paying about $240 a month for a cable-Internet-phone package. After her husband died, she economized with Brillhart's help so that her bill fell to $100 a month.

She still has phone and Internet through Comcast, but she added an antenna, a Roku streaming device, and Netflix, Hulu and Sling services for programming. "I'm saving about $1,500 a year now," she said. "That's worth a vacation."

Brillhart is among a handful of entrepreneurs capitalizing on the cord-cutting trend. Bob Ogus, a retired computer geek in Tucson, teaches classes, mostly to senior citizens, about how to cut the cord.

About 700 people took his classes in the last year, which he describes as "more of a hobby than a business."

In Toronto, Sean Whitehead last year started Kutko Canada to help people who no longer want cable for TV. He installs antennas, DVRs, streaming boxes and then adds services such as Sling, Netflix and Hulu Plus.

In the Twin Cities, Brillhart charges $75 for a consultation in which he analyzes whether a customer needs only an antenna or an antenna plus a streaming device. The fee can be applied to the cost of the antenna installation, about $320 to $480.

Properly installed, the antennas will bring in about 25 to 50 free high-definition channels and produce a picture that is superior to cable's.

Streaming boxes such as Roku can add another one-time fee of $50 to $100, DVRs such as TiVo $200 to $300, and streaming services such as Netflix $5 to $20 per month. After the upfront costs, Brillhart estimates that he saves most customers about $100 per month.

"I help them cut the cord if they don't have the time to research it or the technical know-how to install it," he said. "You can watch the TV you love for less."

Complexity remains an obstacle. "Some customers don't want to admit that they don't have the technological expertise with streaming devices," said Vlad Griskevicius, a professor of marketing and psychology at the University of Minnesota's Carlson School.

In Tucson, Ogus said that only about 20 percent of people who take his class actually cut the cord.

"Cable TV is a security blanket," he said. "You push a button and everything is there. It requires very little work and that's hard for some people to give up."

Brillhart said that sports fans are the ones most likely to stick with cable. "I tell them to find the games in a bar or at a friend's house, but many don't cut the cord, even to save $150 a month," he said.

Even that may change. ESPN joined Sling TV's service earlier this year and major sports leagues are inching toward distribution that does not require cable or satellite subscriptions. The NFL, for example, will experiment with all-digital distribution of a game being played in London this fall.

Cable and satellite companies are fighting back with new, slimmer bundles and pricing. DirecTV's Family package includes 63 channels for about $35 per month.

Time Warner Cable offers a package for $30 a month with 20 channels and HBO. Comcast offers packages with as few as 20 channels including limited basic (about $15 a month), expanded limited basic ($40 a month) and the family tier ($32 a month).

Comcast is focusing seriously on young adults. "The greatest threat has come from the 'cord-nevers,' " said Jason Blackwell, director of service provider strategies at Strategy Analytics, a global market research firm. "They have not subscribed to a pay TV service in their lifetime."

Comcast has introduced an Internet-plus package that includes Limited Basic TV, HBO, and a 25 Mbps Internet connection for $60 a month ($70 after 12 months). Also new in a few markets, but not yet the Twin Cities, is Xfinity on Campus. "They're designed to target millennials," said John Demming, Comcast spokesman.

Ryan Motley, a Minneapolis Community and Technical College student, can't see himself springing for cable anytime soon.

"It's too expensive and there's no need for it," he said. "Netflix is better and it only costs about $8 a month," which he watches on his PlayStation 3 system, for the most part without any commercials.

Despite the inability of the cable and satellite companies to convert millennials as their next generation, few are predicting cable's downfall. The cable companies are still very profitable.

While they may be steadily, slowly losing video customers, they're gaining Internet customers. Comcast added 407,000 Internet customers in the first quarter. "There's more money in Internet than cable customers anyway," said Tom Lindner, former news director at KARE 11.

"Pay TV won't be going away," said Blackwell. "It's just turning into a different form."

John Ewoldt • 612-673-7633