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Summary:

The $100 cable bill is dead. The cable industry just doesn’t know it yet. What killed it was not just ad-supported online video sites and cheap subscription video services, but the fundamental inability of TV programmers and cable companies to reach the next generation of consumers.

cable chaos

The $100 cable bill is dead; the cable industry just doesn’t know it yet. What killed it wasn’t just a combination of ad-supported online video sites and cheap subscription video services, but a fundamental inability on the part of TV programmers and cable companies to reach the next generation of consumers.

It’s still heady days for the cable industry. Cable, satellite and IPTV companies have continued to draw in new consumers to their pay TV services, and have even been successful in convincing existing subscribers to pay more for premium video content. However, one needs only to look at audience demographics to see that big cable’s ability to draw in new viewers is waning, and that spells trouble for the TV industry as a whole.

CNET reports that the average age for broadcast TV viewers has risen dramatically over the past two decades. Marguerite Reardon writes:

Twenty years ago, the median age for ABC viewers was 37; today it’s 51. Fox’s median age has also jumped, from 29 to 44. And NBC and CBS, which have always had older viewers, are also seeing the median age of their viewers rise.

Even the New York Times — which took on the cord-cutting phenomenon with the headline “Plenty to Watch Online, but Viewers Prefer to Pay for Cable” — couldn’t ignore the obvious. Despite the fact that 677,000 new subscribers signed up for pay TV services in the first quarter, the number of young people that are willing to pay for cable continues to decline. A Times/CBS News survey “found that people under the age of 45 were about four times as likely as those 45 and over to say Internet video services could effectively replace cable.”

In other words, cable companies and broadcasters aren’t bringing in new customers. They’re just selling more stuff to existing customers.

Some companies have tried to remedy the model, with new services meant to appeal to the on-demand-everywhere demands of the next generation. Comcast, Time Warner and others are pushing hard to make their cable programming available on-demand through broadband TV Everywhere services so their subscribers can watch shows online at their leisure.

But so-called TV Everywhere services miss the point: the existing audience paying $100 a month for TV doesn’t care about watching True Blood on a laptop. The people watching True Blood on a laptop aren’t going to shell out $100 for a cable subscription.

Consumer behavior is fundamentally changing, and it starts with the young people who don’t see the need for cable.

I’ve used the analogy before, but I’ll use it again. When I graduated back in 2000, the vast majority of my friends had used mobile phones to connect with family, friends and with each other during our college years. When we went out into the workplace and started getting our first apartments, we didn’t bother getting landline phones. We just didn’t see the need for it. What followed in the last decade was a groundswell of declining landline penetration and massive growth in the number of consumers willing to go mobile-only.

Today, there’s an entire generation of consumers that has grown used to turning to Netflix and Hulu for their video entertainment. You think you’re going to sell them a $100 a month cable subscription, when they’ve been doing fine just paying for broadband? The TV industry is going to need to find a way to reach those consumers, because there’s only so long you can cater to an increasingly aging audience.

Cable chaos picture courtesy of Flickr user comedy_nose.

Related content on GigaOM Pro: Cord-cutting? Hold the Phone (subscription required)

  1. Cathleen Macdonald Monday, August 23, 2010

    This is based on the assumption young demos will never change as they age, settle down, and become more affluent. People pass through stages of life and their consumption changes along the way. Some reasons young demos dont buy cable is a) they cant afford it, b) they are living lives that don`t include sitting home watching tv. Wait until they get older and settle down with kids.

    1. Then I guess you need to know what past generations of young people did and compare this generation to that generation. Ryan thinks there’s a paradigm shift along the lines of what happened with landline and cell phones. I think a more interesting question for Ryan would be what are the young generation watching on online video and how does that compare/translate to what’s being offered on cable.

      Another analogy to this situation is newspaper comics and webcomics. Newspaper comics are ever shrinking in both number and size as newspapers die off. Where the real action is in comics is webcomics where artists bypass publishers (and newspapers) to directly connect to their readers. How they support themselves is primarily through tie-in merchandise sales. Primarily t-shirt sales. Ask young people you know what comics they read. I have and they always mention webcomics and never newspaper comics.

      1. The young people I know watching Hulu (and I know a few) are viewing the same broadcast content they would have otherwise. They use Netflix as an unlimited film library — but then, they’re the types that are more interested in indie and foreign films than new releases anyway. There’s always something they haven’t seen that looks interesting. And if by some chance what they want to watch isn’t available through those channels? In some cases they’ll pay for a season pass on iTunes (as a few did with Mad Men) and if not they’ll find a torrent or search for the stuff on megavideo or other pirate sites.

      2. For young people the two most important things that influence how they obtain content are cost and convenience (not legality or “how my parents consume content”). The fact is everyone you could consider “young” knows how to obtain any content they want for free in a matter of hours (depending on broadband speed). The only times these illegal means are not used are when it is more convenient to watch content legally. Examples include ESPN3 and netflix. These sites allow you to watch instantly which is more convenient that waiting for a download to finish. Hulu is not quite in the same league as those two as it has commercial breaks and the player isn’t as well built and isn’t easily watched on a tv (I’ve always wondered about this site’s fascination with hulu). Most people I know (college age) would rather download than use hulu. Netflix is cheap for the value you get.

        What content providers need to realize is that convenience is going to be the most important factor in determining who succeeds in the future. This includes: live showing (especially with sports), ease of getting content to tv (watching on computer screen is not good enough), and instantly available streaming.

    2. After graduating in 07, getting a place, entering the workforce, I never got a land line, was never a newspaper reader, and lived happily in the digital world with hulu and netflix. However recently, I had to succumb to cable for the sake of entertaining my 3 year old kid, I’m not sure that this will be what young demos will do but if the opportunity comes to cut the cable, I’ll be happy to do it in a hart beat.
      The problem with digital/internet tv is that there are no consumer friendly options for the living room. You have to be a geek to use a PC on your tv and that’s not an elegant solution.

      1. Get a Roku and stream Netflix. There’s a ton of kid-friendly content available now!

        http://newteevee.com/2010/07/27/new-netflix-streams-are-childs-play/

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  3. NYT misses the big picture in this story. I read it this morning over tea and realized – while many of the points they are making are valid – they missed the right audience to inform the story.

    We are just a few innovations away from bit-powered-pixels on the tv. As the audience on that side grows, content will find its way there.

    It is incumbent upon the innovators to make the products easy and convenient enough for a mass consumer market and not just target them at the relatively tech-savvy few millions. It is a big market – will attract big venture$$ as entrepreneurs begin to work on it.

    When a consumer gladly pays 100 bucks for 100Mbps and hates paying 100 bucks for canned cable/dish, you know the market is ripe for a big change.

  4. The easiest way for cable to compete? Keep with the TV everywhere idea, but allow customers to select their content a la carte. Why should I pay $100 a month when I want three kid channels, local programming, and HBO? I can certainly live without the majority of the MTV channels and the sports channels, and I’d get more content than I can even with a combo of Internet content like Hulu and Netflix streaming without having to comb 45 different sites to round everything up.

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  6. Right, and wrong at the same time. Traditional broadcast TV services (whether cable, or something else) still have a massive advantage over any IP related services – in the provision of mass live content.

    Superbowl on demand? No chance – it’s a LIVE event, the point is to experience it as it happens.

    Sure the traditional “pay to watch pre-recorded channels” cable market is dying – but the opportunity for live sports & live entertainment delivered to mass markets is growing – and is an area where on-demand IP is going to struggle to meet the scale required.

    TV companies need to innovate on the content and make watching live/first run TV as part of a mass, simultaneous audience more compelling.

    1. re: “Live”, last year’s US Open was ‘broadcast’ live (in HD) online — I watched it on the laptop for parts of the final and on tv. given enough revenue (which follows users, especially 18-35) “live” will be a reality.

      @jamies pierce below – interesting take – the weak will try and evolve first – -and sure enough Dish announced dishonline today…

    2. If there’s a live event or a show that I find interesting enough to watch, I’ll most likely be able to find a group to watch it with or maybe go to a bar (in case of sporting events). I don’t think I’m alone on that front.

    3. In case you missed it the World Cup 2010 from South Africa was full of live events, and I was able to watch the games online on ESPN3. So the bandwidth is definitely there and I’m sure over time it will only get better.

  7. Interesting…

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  9. Could Somebody Give My TV a Reason to Live? « LocalNewser Monday, August 23, 2010

    [...] Ryan Lawler writes on GigaOM that cable's days are numbered–at last–and not for the customer service indifference and offensively outdated DVR technology. Lawler says it's a simple matter of a generational shift: "The $100 cable bill is dead. The cable industry just doesn’t know it yet. What killed it was not just a combination of ad-supported online video sites and cheap subscription video services, but a fundamental inability on the part of TV programmers and cable companies to reach the next generation of consumers." [...]

  10. David Meiselman Monday, August 23, 2010

    Live events are already moving in this direction. I watched a number of World Cup games this summer via ESPN3 and ESPN Mobile on my phone. ESPN is already laying the groundwork to have the direct relationship with that 20-something viewer who wants his/her sports unbundled from the $100 cable bill…

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