Tagged: cable tv

Sorry, but cable TV won’t exist by 2030

A new report hit inboxes today that makes some bold claims about the future of cable TV. The Diffusion Group (TDG) estimates that by 2030, the “traditional” pay TV market — think cable and satellite TV — will have shrunk by 26%, leaving only 60% of households subscribing to traditional pay TV.

That’s undoubtedly a big drop from the 81% of households that get traditional pay TV today. But if analysts really think that cable and satellite will still make up two-thirds of the market for pay TV in 13 years’ time, they’ve got another thing coming.

The winds of change are blowing for the cable TV industry, and it’s all happening a lot faster than anyone thought. Over a million households ditched cable TV in the space of just three months earlier this year. That trend isn’t going to slow down: it’s going to accelerate massively.

Under a best-case scenario for existing cable and satellite providers, distribution is going to change to streaming services (like DirecTV Now), at the very least. The existing cable infrastructure is, in its own way, complicated and expensive. Cable companies have to reserve a portion of their cable bandwidth just for TV services. Cable boxes have to be distributed to homeowners, and technicians have to run a physical wire to everywhere you want to watch cable. It’s also inflexible: introducing new technologies like 4K, HDR, or new sound codecs requires a lot of work, and changes to industry standards.

Now, running a streaming service isn’t the easiest thing in the world — just look at the problems DirecTV Now faced at launch — but even right now, you can argue that it’s more economical for cable companies to have a streaming package, rather than maintain a cable infrastructure. If you can make that argument right now, there’s no way that an outdated system will survive as the most common way to watch TV in 13 years from now.

Want an analogy? Just look at what’s happening to voice. Wireless companies are moving away from the traditional cellular phone call technology to Voice over LTE, which offers better quality calls, and means that cell companies don’t have to spend money and resources propping up an outdated and inferior system.

So from a purely technological standpoint, cable TV as a way of consuming your pay TV package seems doomed. But pay TV bundles as a concept are also being challenged. The traditional model — which sees cable companies negotiating with the major rightsholders to offer customers one single package of channels — seems increasingly uncertain. The rise of Netflix and Amazon’s own original content has diminished the power of the cable company’s distribution, and major rightsholders like Disney are now looking at offering their own streaming services, rather than make customers go through a pay TV provider.

The logical conclusion to all this is customers buying individual channels or content directly from the company that owns the rights, then using a set-top device (like Apple TV or Chromecast) to stream on demand. That’s terrible news for the existing pay TV industry, which would see its role as the distribution middle-man completely eliminated. It would also drive pay TV subscription rates down close to zero, not the 60% TDG estimates.

Predicting the future is hard; putting precise numbers on industry subscriptions in 2030 isn’t a job that I envy. But assuming that the current slow decline of cable will just continue is downright naive.

‘Skinny TV’ isn’t going to save the cable industry from cord cutting

Cord cutting is happening faster than anyone predicted, and it’s taking down the big cable companies with it. AT&T lost nearly 400,000 traditional cable subscribers last quarter, more than even the most pessimistic forecasts. The company posted a net loss of 90,000 pay TV subscribers, which when you factor in the 300,000 DirecTV Now subscribers added, means that 390,000 traditional TV subscribers jumped ship in just 3 months.

A lot is being made of “skinny bundles” and streaming services, $35-a-month lite alternatives to the traditional cable bundle. But according to the CEO of Activate, one of the biggest tech and media consulting firms, skinny TV isn’t going to save anything.

“We don’t think that this is gonna really take off,” Activate CEO Michael Wolf said during the WSJ.D Live conference this week. Wolf doesn’t see the value difference between skinny TV and traditional internet-cable bundles. When you add a streaming service (typically $35 to $40 for around 50 channels, with an additional $15 for extras like HBO or Showtime) to the base cost of broadband — prices of which are slowly being jacked up — you’re not really better off than a traditional TV bundle.

Activate points to the “churn rate,” or turnover of customers, to support its thesis. Virtual Pay TV, or streaming TV bundles, have a churn rate of around 50%. That’s far in excess of the 1% that traditional cable sees.

Another problem is that the big content owners — who often overlap with the big cable companies, like Comcast/NBCUniversal — have no incentive to promote skinny bundles. Many content providers have “minimum penetration policies” in place that force video and cable providers to bundle expensive channels like sports into any bundle that reaches more than 15% of its customers. As cord cutting becomes more prevalent, those kinds of policies will likely lead to skinny TV bundles getting fatter and fatter, until they look exactly like cable.

Real change isn’t going to come from a cable TV alternative that just matches existing cable packages, but serves them over the internet rather than cable. Instead, it’s the shift in who owns the content that will be the real driver for change. Netflix is already investing in original content at a blistering pace, as is Amazon. Disney is also planning on releasing a streaming service for its own content in the near future, which will be a massive shift.

Moving away from a middle-man system of cable companies, onto a system where you buying streaming rights directly from the content owner is the only thing that will really cut the cord once and for all. Let’s just hope we can all afford it.

2017 will likely be the worst year ever for cable TV as cord cutting continues

If you ever wanted proof that cord cutting is more than just a fad, look no further than cancellation numbers for pay TV subscriptions. In 2016, Bloomberg reported that cable, satellite and telecom TV services lost a total of 1.7 million paid subscribers that year. That was estimated to be the largest exodus of pay TV customers ever recorded, but according to Exstreamist, that record could be broken as soon as this year.

Based on Exstreamist’s estimates and data gathered from telecom giants such as AT&T, Comcast, Dish, Charter and Verizon, between 1.8 and 1.9 million subscribers could cancel their cable package by the end of 2017.

Considering how expensive cable subscriptions have become, this doesn’t come as much of a surprise. There are also new streaming services popping up every week, many of which include (or focus on) live TV programming. Why pay over $100 for cable when you can get all the same channels on DirecTV Now, Sling or YouTube TV for less than half the price? Plus, with a majority of these services, you can watch TV on any device you own and even record shows on the cloud. And if you ever lose interest, you can cancel any time you want, free of charge.

Some cable providers have begun to fight fire with fire by offering streaming solutions of their own, but none of them have attracted the kind of attention that Hulu Live TV, DirecTV Now and the like have received.

Exstreamist’s estimation for total cancellations this year is just that — an estimation — but data shows that 470,000 people cut the cord in the third quarter of 2017 alone. As streaming services continue to dominate the conversation, this trend is only going to get worse for cable providers. 2018 could be yet another record-breaking year.

Young Americans will be the death of cable TV

The best data we have suggests that cord-cutting — ditching cable TV for streaming services — is happening faster than anyone foresaw. But in case you were uncertain about cable TV’s future demise, more research is here from the Pew Research Center to really stick the knife in.

A new survey suggests that young American adults, aged 18-29, are disproportionally using streaming services rather than cable TV to watch programs. Even if older generations are keeping cable TV alive for now, the writing’s on the wall.

According to Pew’s survey, 61% of those in the 18-to-29 age bracket say the primary way they watch TV is on streaming services. That number is just 31% for cable. Using an analog antenna isn’t in fashion among the youths, as just 5% of people surveyed used a digital antenna as their primary way of getting TV.

Those numbers are bad on their own, but you need to consider them in context to understand the problem facing cable TV providers. Cable was the most popular way to watch TV among every other age group: 52% of those 30-49 use cable the most, 70% of 50-64s, and a truly impressive 84% for those over 65.

That should prove to cable companies that streaming services aren’t going to be some kind of side distraction to regular cable bundles. As young Americans grow up, they’re going to take their viewing habits with them, and cable subscriptions will start falling off a cliff — far faster than they are right now. It won’t be a matter of people cancelling cable subscriptions and replacing with something new; people moving into their first home won’t get cable to begin with.

Cord-cutting is happening faster than anyone predicted

Cable companies are terrified by the onset of “cord-cutting,” the term that analysts have attached to the trend of young people not wanting to fork over $120 a month for a mostly-useless cable TV package. Cord-cutting has the potential to completely change the way we watch content, by cutting out the middleman and having a more direct path from production directly into our brains, destroying a multi-billion-dollar industry in the process.

If you’re the exec of a cable company and that sounds like bad news, it’s about to get worse. A new report by eMarketer shows that ad revenue on traditional TV is down compared to last year, and the number of people expected to cut the cord in 2017 is up to 22 million. Yikes.

According to the report, there will be 22.2 million cord-cutters age 18 or older this year. That’s up 33% from the previous estimate of 15.4 million, and represents billions in lost revenue for the cable industry. “Younger audiences continue to switch to either exclusively watching OTT video or watching them in combination with free TV options,” said Chris Bendtsen, senior forecasting analyst at eMarketer. “Last year, even the Olympics and presidential elections could not prevent younger audiences from abandoning pay TV.”

The news gets worse when it comes to the bottom line. The slowdown in TV viewing is reflected in TV ad spend, which is projected to drop to 34.9% of total ad spend by the end of 2017, and below 30% by 2021. “Traditional TV advertising is slowing even more than expected, as viewers switch their time and attention to the growing list of live streaming and over-the-top [OTT] platforms,” said Monica Peart, eMarketer’s senior forecasting director.

Cable companies are increasingly turning to streaming services to make up the difference. AT&T launched DirecTV Now to customers last year, and is pushing the service heavily through tie-ins with its wireless cell business. Verizon is also set to launch an over-the-top service in the near future. But those new services face a far more competitive landscape than traditional cable. YouTube TV, Fubo, Sling, Hulu, and PlayStation all have good, cheap streaming cable alternatives, with fancy tech features like unlimited cloud DVR. Standalone subscriptions to Netflix, ESPN and HBO eat away at the premium TV market that cable used to be essential for.

Overall, it’s bad news for the cable industry. Despite lackadaisical attempts to transition to the new way of doing business, it’s just a harsh reality that streaming services are going to lead to more competition, and ultimately lower profits for the companies providing the content. No wonder they’re pushing to end net neutrality laws.