“The reports of my death are greatly exaggerated.”Mark Twain’s famous quip regarding his erroneously reported death seems like an apt summation for the increasing chatter surrounding pay TV’s supposed impending decline .
This belies that there has been no hard evidence showing a massive dropoff in pay TV subscription. If anything, Americans may actually have more wires coming into their home than ever before.
Lets survey the evidence.
According to a report from an ISI Group study, 2.3 million Americans have pulled the cable cord since 2010. This sounds impressive—till you consider that they categorize the bundled Internet access, telephone (landline), and television packages from AT&T and Verizon as “telecommunications”. Comcast and Time Warner, among others, offer similar packages it is worth noting.
Call it what you want to call it, but this is ultimately semantics. In the end, consumers will consider a bundled pay TV package not coming from a satellite dish “cable”. According to ISI’s numbers, the “telcos” market share increased 3.6 per cent while cable’s share slumped 3.8 per cent. In other words, unless the market as a whole has shrinked drastically—and there is no evidence indicating it has—there has been no major dropoff in what we would colloquially call “cable TV”.
On the other hand, Credit Suisse analyst Stefan Anninger predicted that there will be 200,000 less subscribers to pay TV in 2012. Consider for a moment that over 80 million American households have some form of pay TV (cable, satellite, broadband). Two hundred thousand and change lost subscribers isn’t an indication of a broad trend—it’s a rounding error.
Further undermining the idea of a decline, Bernstein Research found that the number of pay TV’s subscribers actually increased by 224,000 last year. Again, a pretty neglible number either way, but certainly not indicative of a broad based decline. In case you were wondering, Bernstein found that the “telcos” picked up 3.2 million subscribers in 2010 and 2011,
If this were a declining medium, it would also seem a little strange that cable TV raked in its highest ad sales ever last year—and is forecast to do even more this year. When it comes down to it, cable TV is still the best way to reach the largest number of engaged eyeballs around. According to Nielsen, the average American watches over 32 hours of TV a week, presumably much of it on cable channels.
So what will happen to TV? The likely scenario, as we’ve argued before, is an agonizingly slow decline with TV remaining an amazingly large and profitable business for many many years to come. The narrative of cord cutting is intruiging—and even makes sense on some level—but it’s not clear where they would go since there is still a monopoly on content distribution.
In other words, cable TV is here to stay until someone figures out how to break the bundled programming model (i.e. the consumer pays one flat rate for 100 channels instead of picking and choosing channels a la carte). There are rumours that this will be central goal of the Apple TV, but it is far from clear whether this will succeed. Furthermore, cable companies have started wising up that consumers want to watch TV across multiple devices. Once they fully accomodate consumers on this count—which seems inevitable—it will make the bundle that much harder to break.
Many point to online streaming services as potential heirs to the throne. Netflix is indeed a great place to stream TV shows, but content providers can “window” them out of relevance if they choose. Furthermore, content owners are not worried about Hulu—they own it after all.
THE BOTTOM LINE
- There is no meaningful evidence for a decline of cable TV.
- American still love to watch cable TV, which is why it is still the most effective advertising medium around—for the time being.
- The competitive advantage of cable TV is a monopoly on content distribution, breaking the bundled programming model is the key to success for would-be usurpers.
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