Media Planning & Buying Websites Wireless

Is the Internet Killing Cable TV?

Posted by Bri Bauer on January 14th, 2013 at 12:17 pm

Will 2013 be the year in which streaming digital TV goes mainstream? The numbers are in, and it doesn't look good for traditional cable TV.

A 2012 study by the ISI Group confirmed that American viewers continued to ditch their cable TV subscriptions in favor of accessing high-speed streaming services. Instead of flipping through “whatever's on TV” every night, these cord-cutters are hooking up their smartphones, laptops and tablets to traditional TV screens or gaming devices and accessing their programming via the Internet.

Cutting the Cable Cord

If you peruse cable.TV, you'll see an average cable package that includes 100-plus channels runs about $70-100 a month. Experience shows that most viewers regularly watch only four or five. What streaming digital TV offers is the ability for viewers to watch the content they want, when they want it, using much-cheaper (starting at about $8 a month) services like Netflix, Hulu Plus, Apple TV, Roku and Slingbox. This may spell doom for cable operators, who are coming up with their own initiatives to prove their worth to current and potential subscribers.

They'd better hurry up. According to businessinsider.com, three of the nation's major cable TV players lost a total of 621,000 subscribers from 2011 to 2012. The ISI Group study projects that cable will decline into just one in three homes by 2017.

Younger Viewers Change the Tide

Not only are subscribers jumping ship from cable TV, but many of today's young Americans never had it in the first place. As Credit Suisse analyst Stefen Anniger told hollywoodreporter.com, the numbers for new cable subscribers are down, while the number of occupied homes in the U.S. is increasing.

Anniger called these viewers “cord-avoiders” and "cord-nevers," adding they may be the downfall of cable television. "

With younger viewers having grown up with alternatives to paid television, they are accustomed to beating the cable system with online streaming, DVDs, YouTube and other content enticements,” he said. “They are growing up in an Internet-based video culture, in which the mantra of 'Why pay for TV?' and 'Pay TV is a rip-off,' develop."

In Cable's Corner

One thing cable TV has going for it is its ability to bring live sports and local news to American living rooms. For sports fanatics and average Joes and Josephines who want their local nightly news, cable is still their best bet, and cable providers are the first to point out that streaming television lacks these two elements.

Some streaming services offer select national news programming such as CNN International, CBS News and BBC International, but cable companies know Americans like their local news via cable TV. Plus, hardcore sports viewers will likely opt for a providers' premium sport packages, which streaming services can't complete with, at least not yet.

Another way cable operators are boosting their numbers is with Internet broadband packages. Online streaming services require consumers to have a broadband Internet connection to access to their services, and these connections are provided by local cable companies. As a matter of fact, while pay TV numbers are down any which way you look at it, BusinessInsider.com reported that Time Warner Cable saw an increase of 59,000 Internet broadband subscribers in 2012.

Cable Fights Back

To prevent viewers from jumping ship, premium pay networks like HBO and Showtime are insisting on exclusive content. By refusing to offer their mega-hit shows to streaming services, fans of their shows must continue to subscribing with their local cable company. Access to hit shows like “Game of Thrones,” “Mad Men,” “Breaking Bad” and “Homeland” are reason enough for some viewers to stick with cable TV.

In addition, cable operators have stepped up to the challenge by offering on-demand services to supplement live television offerings. Comcast starter packages include most cable networks (think Bravo, ESPN, FX, HGTV and TNT), but the company now offers Xfinity On-Demand to subscribers through a premium subscription. Xfinity On-Demand offers programming outside their allotted networks, such as DIY and OWN.

More Trouble Ahead

While it may be too soon to label cable obsolete, there's a battle brewing between content creators and cable companies on costs and access for programming that doesn't bode well for the old guard.

Last year, a well known satellite company dropped network programing by AMC. This was followed by another major company dropping 26 Viacom channels. The dropped channels included fan favorites like Comedy Central, MTV and Nickelodeon. Again, this was a battle over costs, due to AMC and Viacom’s demand for increased rates to access their channels.

Time Warner Cable dropped the low-performing and pricey network Ovation, and recently warned subscribers that there's no guarantee it will continue to carry channels whose contracts expire soon. That means mainstays E!, Lifetime and Starz are candidates for the chopping block. This action is part of Time Warner Cable's CEO Glenn Britt’s platform to rationalize the company’s bloated channel offerings, according to The Wall Street Journal.

What's Next?

Is this the end for cable TV? It's too early in the game to call it quite yet – remember when they thought video would kill the radio star? – but it is obvious they'll have to evolve to survive. Stay tuned.

Leave a comment