Cable TV, going the way of newspapers
Just as newspapers had to adapt to the online world, so will cable TV. Young people who are used to free media and the Internet won't subscribe. And as my wife and I are discovering, we don't need the cost or channels of extended cable programming.
For the first time in over 20 years, I don’t have TV access to CNN, ESPN, or TBS. My wife and I dropped our expanded cable package, due to a surplus of content we get online and from Netflix. We now pay about 10 bucks a month for little more than the old three-letter networks, a heap of home shopping channels, and C-SPAN.
We’re not alone in ditching expanded cable. Cable TV sellers will likely endure misery in the coming years similar to that visited upon US newspapers in the last few decades. In fact, the decline has already started, and to survive, cable providers are going to have to become much more nimble.
Americans have been buying steadily fewer cable TV subscriptions over the past decade, according to figures from SNL Kagan. Numbers of cable TV subscriptions rose in the US every year from 1980 through 2001, but have since been on a slow slide.
The New York Times reported that 216,000 American households canceled cable, satellite, or telecommunications subscriptions in the second quarter of 2010. An analysis by The Associated Press, likewise, found that 8 of the 9 largest US subscription-TV providers lost a total of 195,000 subscribers in the second quarter of this year. The two main reasons listed for these quartile declines were a down economy and the increasing emergence of “cord-cutters” like me, who find they can patch together sufficient amusement from other places.
While the weak economy has led some American families to unplug their cable packages, a stronger underlying cause is the online accessibility of news and entertainment.
It may take a few years for a crisis in cable TV sales to be widely appraised, but the medium is trending quite like US newspapers before that industry’s famine. When measured in average daily circulation as a percent of households, newspaper use has actually been declining in the US since the 1920s, the dawn of mass electronic media. But it took many years for newspapers to pull the alarms and print pink slips. Cable TV subscriptions in the US, too, appear to have peaked in the early 2000s, and though cable providers may be profitable for a while, their product is becoming easier to live without.
Young people are particularly less likely than older Americans to subscribe to cable TV packages, an omen just as consequential for cable sellers as it was for newspapers. I work with college students, and the ways they consume media spell disaster for outfits like DirecTV. Young Americans have been raised in an age of increasingly free media, and they find bundled content subscriptions to be unholy.
Cable TV peddlers have tall demons lined against them. Their models are to many consumers inflexible in an on-demand age, overpriced, and overloaded (people may have hundreds of channels but typically watch 15 or 20). Recognizing these motivators, the PBS site Mediashift published in 2010 a Guide to Cutting the Cord to Cable TV.
“In many cases, people who have canceled cable still get to see their favorite TV shows, but often much later than those with cable,” the report said. “If they can deal with being a bit behind, and don’t mind the tech hassle of setting up a Net-to-TV connection with gear, they’re often happy to save money and watch what they want.”
Some providers can prepare for the coming departure of cable customers by focusing on Internet services. While I may cancel my most basic cable package with Time Warner (which I think I can live without, and the cost of which will soar 40 percent starting this summer), I certainly will not cancel my Internet service.
I’m not at all saying that people won’t pay for content. The success of magazines like The Economist and The New Yorker indicates that people will still pay for long-form journalism. Apple has amassed over 10 billion bills of evidence that people will pay for music. What Apple knows, though, is that the packaging of the content must be compelling and the price attractive, and many consumers believe that cable TV offers neither.
Consumers have gotten very good at reducing their information expenditures with digital alternatives, and cable TV is the next legacy industry that will have to adapt.