On Demand

Comcast’s $2 Billion-a-Year Secret

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How would you like to earn a $300-400 return on a $70 investment, give or take a few dollars? Let me ask you something else, are you happy with your internet provider? If you’re like millions of Americans who use Xfinity/Comcast’s high-speed internet, chances are you’re not.

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What if I told you that sending a message to Comcast is as easy as driving to the local big box store and making a simple phone call? Intrigued?

Let me explain:

Comcast is the big brother of cable providers, especially here in the Northwest. If you want digital cable and high-speed internet without a dish, you’ve pretty much got no other choice. While supposedly their conglomerate is not big enough to warrant an anti-trust fine, Comcast is a monopoly in the true sense of the word. They have a lock and key on the internet above 30mps speeds, and if you want to get that high-speed bandwidth, at some point you have to go through Comcast.

IMG_0481But what does getting internet from Comcast entail? For those already customers, we know this story front and back. The phone calls, the technician appointments, the service call windows that last all day and the guy shows up early anyway because another job was cancelled and you’ve got to go get the kids from school… Then there’s the equipment. With any internet package, you need a modem to translate that signal from the cable line into Netflix or Call of Duty or Cat Videos.

When you think about it, equipment rentals are the bread and butter of Comcast’s quarterly income. Think about the last time you looked at your Comcast bill. They have a piece of equipment for each service they provide. Whether you want digital cable (which means you pay at least $10 a month for a set-top box), or phone (which takes a different huge, expensive modem) or just plain-old high-speed internet, Comcast is going to charge you a monthly fee for renting that equipment… That’s just to get the service you’re paying for already.

I don’t know about you, but it doesn’t make any sense to charge customers a certain price for a certain service, and then turn around and say, “We’re going to need another $25 a month to allow your TV/computer to receive that service.”

In my book, that’s called “The Ol Okie-Doke.”

The truth is that these huge “providers’ get away with this kind of behavior all the time. They laugh in the face of government regulation because they pay lobbyists a lot of money to make sure congress keeps passing legislation that helps companies like Xfinity/Comcast grow even more powerful. Because seriously, when was the last time a Senator worried about his internet bill? The people that have the power to make decisions about whether huge multi-national conglomerates are not fleecing the rest of the 99% just don’t think about these kind of things… Not because they’re bent, corrupt stooges, but because they’ve never had to sit down and decide whether they can afford to keep INTERNET or not.

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The way to send a message to Comcast, and get a return on your investment, somewhere in the vicinity of 11% is simple. Most of the equipment you rent from Comcast is specific to the service they’re selling, for instance you can’t just go buy a set-top cable box and expect 700 channels. You have to “rent” Comcast’s.

This isn’t so for internet.

Last Saturday night, when our internet died, panic gripped the Toomb household. We’d been having issues for a while, with dropped signals and spotty connectivity… But we figured it was just the fact that we’ve got a house full of people that are constantly plugged in. We are bandwidth hogs. From high definition multiplayer video games to streaming HD movies and tv shows, we cut the cable cord almost two years ago and get all our entertainment through the internet. Therefore we rely on every drop of juice we can squeeze out of that connection. That plus the fact that my wife and I both work from home, when the internet goes out in our household, alarm bells go off and a ticking clock starts... The ever-constant pressure to get the network back up before Monday hits.

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I spend most of the night troubleshooting with the friendly Comcast operator before he confirmed my suspicions by letting me know the modem was dead and I needed to take it in to the nearest Comcast office to swap it out for a new one. That and take the opportunity to tell me how he can save me such and such by switching to whatever.

That’s when I realized that I could just go out and just buy a new modem and have Comcast register it over the phone… And it hit me… I’m paying $8 a month for nothing. I’ve had a Comcast account in my name since 2002, a fairly long-term customer. At $8 a month for 12 years, that’s a cool $1,152 I’ve paid in rental fees for a modem alone.

It actually makes me cringe.

If you figure the average lifespan of a modem is 3-5 years, I could have bought 3 brand new from the store and saved myself $989 in the mean time. This time I didn’t hesitate. I looked up the exact same model that Comcast rents now and found it for $69 at Walmart. That $69 will save me $315 if the modem only lasts 4 years, and $411 if it hangs in there for 5.

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Comcast has something like 22 million customers, and at $8 a month, modem rentals are a $2 billion a year business. That’s $2,000,000,000, with 9 zeros. Imagine if every person that pays that $8 a month took their next paycheck and bought a comparable $60-80 cable modem. When was the last time you heard about a company losing $2 billion a year and not get shaken to the foundation?

The only way to let Comcast know that we are unhappy with this system is to do just that.

The numbers don’t lie, if any company lost $2 billion in profits, their stockholders would be screaming for their heads, holding pitchforks and torches high. I don’t know about you, but I personally think Comcast has a little pitchforkin’ coming. I mean, seriously, if $8 a month is worth two billion a year, imagine what they make from HD DVR boxes that they charge upwards of $15-20, and that’s just for one television. If you’re crazy like me and want high definition on the various high definition televisions in the house, you’re shelling out rental fees like nobody’s business. So go ahead, grab your pitchfork…

Here is the modem I bought, I’m not being paid to recommend it, there are just a boat load of options and this one is a good, solid bet that is compatible with Comcast’s system.

http://www.walmart.com/ip/Motorola-SB6121-SURFboard-DOCSIS-3.0-Cable-Modem/20742485

 

Blockbuster Video: A Movie Renting Relic

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Walking into the lone Blockbuster in Eugene on Willamette St. feels like walking into a museum. In the center of the store is a wide open space that feels like a gallery. To the left is game rentals for Playstation, Xbox and Wii. To the right is the movie section with everything from Action, Drama and Comedy to Independent and International. It’s almost as if it’s an exhibit showcasing a time in the entertainment industry when we drove to a store and walked aimlessly down aisles looking for something to rent on a Friday night.

Remember when you used to go here to rent movies.

But that time has come and gone. The days of looking at plastic cases advertising a particular movie title are over. As many Science Fiction movies have warned us over the years, the machines have taken over. Replacing physical stores and human employees are rental kiosks in fast-food restaurants and grocery stores, as well as streaming options in our homes. Thousands of titles literally at our fingertips have become the new way of accessing home entertainment.

Despite this shift in the way we access and rent content, Blockbuster hasn’t fully thrown in the towel just yet. A couple of weeks ago, the video chain announced the release of the Better Blockbuster Extravaganza — which includes free rentals of movies and games at their updated stores.

Through July 31, Blockbuster is offering exclusive deals as part of the release. Like me you’ve probably gotten emails from Blockbuster advertising coupons that are available at betterblockbuster.com. Some of the deals they’re offering include: Rent one movie get one free, rent one game get one free and new subscription plans that appeal to kids and adults.

“The Extravaganza is a great opportunity for people to visit the new and better Blockbuster — we have refreshed our stores, creating a new shopping experience,” said Blockbuster president Michael Kelly.

Kelly continued his PR pitch by saying that the video chain has created an easier way to find what customers are looking for and that Blockbuster has nearly 900 store locations (Still) which makes them the largest video rental chain nationwide.

The only Blockbuster in town.

Kelly has to say words like “easier,” “refreshed” and  “largest” because he’s the president of the company. But really all he’s saying is that Blockbuster is the last survivor of the old way to rent movies. To say Blockbuster is the largest video rental chain in the country is like saying you have the largest VCR store in the nation.

He went on to say that Blockbuster has more stores than Apple, Microsoft and Costco combined. He has to compare his company to others to provide context, but when you think about it, Microsoft is the number one “software” company according to softwaretop100.org so they aren’t really worried about “hardware” or more specifically, physical things to sell.

Apple has more money than the Government and they sell their products in big box stores like Best Buy and Target so the need for more exclusive Apple stores isn’t necessary. Costco stores are 142,000 sq. ft. on average so they can’t exactly put one up wherever they want.

So the examples Kelly is comparing his company to don’t exactly hold up when you look closely, but looking at the big picture, will this “Blockbuster Revision” produce a more competitive balance between the archaic rental store and the new-age kiosks, on demand and streaming services?

According to The NPD Group, which is the leading provider of consumer and retail information, DVDs and Blu-ray discs rented from kiosks as well as streaming subscription services like Netflix accounted for 73 percent of all video rentals in the third quarter of 2010 while in-store rentals provided the remaining 27 percent. Keep in mind that these numbers were reported in January of 2011 following the announcement that Blockbuster had filed for bankruptcy. The company has since been bought by DISH Network Corporation.

This is the new way to rent movies.

Redbox currently has more than 36,000 kiosks around the United States renting new-release movies for as little as $1.20 a day. The nearly 900 Blockbuster stores nationwide charge new movies $2.99 to rent for the first day. Last time I checked, 36,000 is a lot more than 900 and $1.20 is less than $2.99.

Besides having to worry about kiosks, an even more convenient alternative to driving to a location is instant streaming. With so many options including Netflix, Hulu Plus and Vudu, consumers have access to a vast library of older and newer titles. And there are many devices that can support these services including the Playstation 3, XBOX 360, Nintendo Wii, a number of Blu-ray machines and newer televisions that have streaming built in.

But there is one area in which Blockbuster has a shot at surviving; their competitors continuing to increase prices.

Redbox charges $1.20 a day to rent a movie, but a year ago that price was $1 so it’s only a matter of time before the price goes up again as Redbox deals with the cost of buying discs and licensing agreements with movies studios. Netflix of course went through a public relations nightmare in 2011 when they decided to split their online streaming and DVD-by-mail plans into two and thus creating a 60 percent price bump for people (including me) who wanted both plans. As a result, the company lost millions of subscribers and its stock fell another 25 percent on Wednesday, following a drop of 19.4 percent for the second-quarter earnings this year.

This doesn’t look refreshed to me.

Blockbuster of course realized there was a shift in the movie rental market and they started a streaming service of their own. But with Netflix, Hulu Plus, Vudu, Amazon Video on Demand, iTunes and a new streaming service coming later this year from a joint venture between Redbox and Comcast, Blockbuster might get lost in the shuffle — as well as a symbol for the way we used to rent movies.

So Michael Kelly may say that his Blockbuster stores have been “refreshed,” but as I walk down aisles of DVD racks at my lone Blockbuster in town, I see a store that looks hollow and gaunt; anything but refreshed. The only difference between the way it looks now and when I visited it a month ago is the presence of DISH Network. I drove all the way across town for this? I could be sitting at home mulling over these same options from the comfort of my recliner.