TV Is Dying, And Yes Netflix and Hulu Are (Partially) to Blame

/ Nov 29, 2013

TVisdead

TV is dying and there’s not much anyone can do about it.

That is according to this piece from Business Insider, which points to several pieces of data that suggest that linear television, as we’ve come to know it, is slowly but surely dying out. The article cites data from Citi Research, which says audience ratings have been on a steady decline since 2011, and analysts Craig Moffett and Michael Nathanson, who earlier this month published a report noting that the pay-TV industry had its worst 12-month stretch ever in terms of net subscribers.

This includes the 306,000 subscribers Time Warner Cable, one of the largest pay-TV operators in the country, lost in Q3 of this year alone — a good portion of this loss was attributed to Time Warner’s protracted carriage dispute with CBS, which knocked the network and its other owned and operated channels of off Time Warner’s airwaves for a good month.

Overall, the report says 5 million people have axed their cable or broadband subscriptions since early 2010.

And the decline in TV audience size extends to what many consider to be the last bastion of linear TV — live programming. Specifically: live sports, which routinely pull in higher ratings than other types of programming, and are the reason for ESPN being one of the most-sought after and expensive cable networks on TV. Unfortunately, even sports isn’t unscathed, as Game 1 of the 2012 World Series generated the lowest ratings ever for that game, with ratings dipping the most among the 18-49 age demo. The same applies for the NBA Finals, which hit record lows in 2007 and 2013.

So what happened? The answer is easy, if not obvious: Netflix and Hulu.

It’s important to note that by and large people have not stopped watching TV, they’re just not watching it like they used to.

As video-viewing continues to shift to digital devices, cable is taking a hit because services like Netflix and Hulu are able to offer the same access to TV programming, but with the flexibility for users to watch the content whenever and wherever they want.

Tom Rutledge, CEO of Charter Communications, told analysts that 1.3 million of the company’s 5.5 million customers did not want cable, but they did want broadband internet. “Our broadband-only growth has been greater than I thought it would be,” he said. While there is no way to tell how many of those 1.3 million customers subscribe to Netflix or Hulu, this statistic does suggest that consumers are placing a premium on internet connectivity more so than having access to cable.

And people are spending more time than ever consuming content on mobile devices. Per eMarketer data, TV’s share of consumption has dropped from 45% in 2009 to 38% in 2013. Meanwhile mobile has seen an uptick in share from 4% to 20% in the same timeframe. Combine that with the fact that around 40% of YouTube traffic comes from mobile devices, and you can see why mobile is playing a major role in the decline of linear TV. As Netflix, Hulu, and YouTube begin to provide better, more efficient mobile experiences, TV will continue to find it difficult to keep our attention during peak hours.

Another problem that TV faces is the price-point set by streaming services, which is unmatchable by cable networks. At a typical cost of $7.99 a month, SVOD services are more cost effective than cable, which has been steadily increasing prices over the past few years.

Analysts Craig Moffett and Michael Nathanson spoke to this self-destructive model cable has adopted:

“Of course, the fact that pay-TV revenue is still rising smartly is part of the problem … We have always argued that cord-cutting is an economic phenomenon, not a technological one. … Pay-TV revenue growth reflects rapid pay-TV pricing growth and that is precisely the problem. Rapidly rising prices are squeezing lower-income consumers out of the ecosystem.”

Those very same lower-income consumers seem to be finding a better, cheaper option with internet TV services, which are categorically less expensive than most cable packages. It’s a brutal cycle that cable seems to be caught in. Luckily, streaming services seem to be ushering in a new age of instant entertainment.

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