Why Over the Top TV Won't Necessarily Save You Money

It's too early to say whether most consumers will save money if, one day, they are able to buy TV shows one by one, or at least channel by channel. Logic suggests people should be able to save money.

They might buy fewer channels, since most people actually watch seven to 12 of all the channels they pay for as part of a cable TV, satellite TV or telco TV subscription. In principle, that could offer some savings.

The same logic might apply to purchases of single shows. 

And you might think that "cutting out the middleman" (cable TV, satellite TV or telco TV supplier) would offer a further chance to save money on retail purchases of content.

Maybe. Maybe not. Ignore for the moment the issue of whether higher Internet access spending will be one incrementally higher cost to pay, since all that TV consumption will chew through perhaps a gigabyte an hour. 

If a person watches TV five hours a day, that's 35 gigabytes a week, and 140 GB a month. If there is more than one viewer in a household, the numbers will likely be higher, since it is quite rare for two or more people to prefer to watch exactly the same content, at exactly the same time, in the same location within a home. 

Also, use of digital video recorders also will consume bandwidth at the same rate as watching real-time TV. 

DirecTV pays $1 billion a year for Sunday Ticket. DirecTV earns about $725 million a year in Sunday Ticket revenue from about 2.8 million subscribers, Citigroup estimates.

Switching to online delivery will not automatically change those economics in a helpful way, either for a provider or a subscriber. 

Perhaps the answer to many such questions involves asking what Google might do. But you see the point: content costs alone, irrespective of marketing, network and operations costs, make content an "expensive" item. 

And make no mistake, nobody in the content business is dumb. Content distribution changes only when content owners think they can switch, and still make as much, or more money than before. 

So only after widespread licensing of content occurs will we be able to ascertain whether linear TV is necessarily more expensive than over the top alternatives. In many cases, some of us would be willing to bet, "saving money" will not be so easy.