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Summary:

For the first time ever, the number of U.S. households paying for TV service will go down. The news comes as a tipping point in consumers’ struggles to break away from a TV industry that forces them to buy bundles of channels.

TV, bored, watching tv
photo: ollyy

It’s finally happening. The number of Americans who pay for cable-like TV products is declining, says a research forecast that claims subscriptions peaked at nearly 101 million in 2011 but will decline to less than 95 million by 2017.

The stats come by way of research group TDG which presented the findings in this chart:

Decline in cable

While a five percent decline is hardly earth-shaking, TDG describes the end of cable TV’s growth as a tipping point with “long-term tectonic implications.”

This makes sense. The price of cable bundles is climbing ever higher, at the same time as a bevy of new distribution options is increasing consumer frustration at having to purchase channels they don’t want. Meanwhile, a rising generation of “cord-nevers” thinks buying a cable package to watch one show makes as much sense as buying a CD to hear a single song.

But don’t count out the TV industrial complex just yet. The industry still has the best content goodies, including sports and HBO fare, and will continue forcing consumers to buy bundles to access them. It will also keep dangling cable passwords as a requirement for people to watch content on mobile devices.

Meanwhile, the brave new world of cord-cutting is still not ready for primetime. As my colleague Stacey Higginbotham explained, the online video world still has too many parts and too little accountability – meaning consumers will be stuck with unreliable service for some time to come. The first cable decline is a tipping point, not a revolution.

(Image by lev dolgachov via Shutterstock)

  1. Reblogged this on BrownGoods and commented:
    OHHHHH…very interesting. What say you almighty cable TV?

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  2. Given that many people now get their Internet service from cable providers, I think we may see a situation in which cable TV is bundled with premium Internet rather than the other way around. For example, pay $10-20 a month to add TV service to your Internet bill (just as they already sell to business internet subscribers). MSOs could do decent business this way for a long time to come by segmenting the market — sell add-on Internet to their current TV subscribers, and sell add-on TV to their new Internet subscribers. In the end, they don’t really care whether you pay them $80 a month for Internet and $20 for cable, or $80 a month for cable and $20 for Internet – they just want your $100 each month.

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    1. Interesting comment, but the price will be closer to $150-$200 for the combination, mot $100, and consumers will still question the value of the bundle as well as the necessity of the pay-tv component of that bundle.

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  3. Any time you see a bar graph where the scale doesn’t start at zero on the Y-axis, someone is trying to exaggerate the results. Any time you see a graph that also tries to hide that fact by also removing any labels or scale from the Y-axis entirely, you know they’re trying to really be manipulative.

    I agree that the data is interesting, but that graph is just terribly misleading.

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    1. I’ve been doing research and running a research department for 12 years and we rarely use zero-basis graphs when the differences are less than 10% and your dealing with five or more years in the period. As well, you do need to label the y-axis if the domain is specified in title text (which in this case it clearly is).

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      1. Not sure what kind of “research” you do, but in the worlds of data visualization and hard science, starting the y-axis at something other than zero is considered suspect, if not outright deceitful. It is usually used to exaggerate a small difference in two numbers, which your comment clearly is confessing to…

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  4. Love it! Saw the writing on the wall a while back and then the research started backing it up. This is why it is so important to know TV viewership better than anyone, and Rentrak’s Station View Essentials is a product that does exactly that.

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  5. The biggest challenge for cable is that there’s too much old content floating around, driving down the price. I can find plenty of perfectly good entertainment on Netflix for $8 a month. Why do I need to pay $100+ for supposedly newer material. The jokes are the same. The plots are the same. Soon much of this may even be free.

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    1. “there’s too much old content floating around, driving down the price”

      True in theory but…take a look and find out the *stunning* percentage of video content (TV and films) owned solely by the big 6 (Disney/ABC, Paramount/CBS, Fox/Fox, Comcast Universal/NBC, TW/CW, and … Sony).

      I don’t think it is a stretch to say that 95% of older content is owned by one of the biggies (indie films and documentaries being an exception).

      That is the major reason why Netflix Online mostly blows in terms of content – Netflix can’t afford the extortionate prices demanded by the Big 6 to have a fully stocked library (DVDs are much “cheaper” for Netflix due to the first sale doctrine that allows Netflix to lend and lend and lend the same DVD many, many times).

      The Big 6 will never freely/cheaply make their content libraries available – they know that if they open the floodgates, their current lucrative subscription models for pay TV will collapse.

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  6. The decline is due to the complete waste of ever more of the channels. What does it mean when TLC (The Learning Channel) runs a Honey Boo Boo marathon? It used to be that BBC America was a great source of British TV drama and comedy. Now it just drivel about bad restaurants and improbable activities concerning expensive cars. The new meaning of Discovery Channel is “keep watching and you might Discover some new content”. Cable/satellite has gutted itself.

    There is little left to watch. All it will take is for the content producers to figure out they can get as much or more revenue from other delivery systems and the current cable/ satellite game is over. The decline will become exponential, not linear. Then the cable/ satellite model will have to become “you buy your own access equipment, access is free, we sure hope you’ll watch”, sort of like broadcast TV.

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    1. And what other delivery systems are you thinking of?

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    2. Mostly true but Top Gear on BBC-America is needed quality content.

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  7. I love my DirecTV but hate all the crap that I have to pay for too…

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  8. I would wager that cable and DBS would take a huge hit (15%-25%) if they didn’t have ESPN tied up. If all ESPN channels (ESPN, ESPN 2, etc.) became available via streaming the cards would fall. Of course, streaming would have to be more reliable.

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  9. So Pay TV will hit zero by year 2057 or so….?

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    1. Of course not, this is just a loss of 6 million subs in five years — the sky is not falling, Chicken Little! Pay-TV in the US will remain THE major distributor of live TV programming for years to come. Moreover, the forecast is only through 2017, not 2057.

      Remember, cable found a way to maintain its significance even as DBS and telco/fiber TV came along. So too will the residential pay-TV industry as more OTT sources become available.

      However, the next five years are particularly important for pay-TV operators because the extent of their dominance will be challenged by (a) an onslaught of high-profile branded “virtual MSOs” (not your simple Netflix), combined with (b) rising prices to which pay-TV operators are particularly susceptible (recent retrans costs going sky high, sports in particular). This will drive even the cost of MVPD bundles through the roof, leaving a la carte-friendly OTT operators to pick up those that want to jump ship.

      Almost a perfect storm of events percolating. Then again, these losses can be countered via aggressive marketing and pricing by pay-TV operators. All-in-all, the losses could be much worse, but the power of pay-TV operators will keep the damage down to a loss of six million.

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      1. um, that was my point….

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      2. I think I understand what you are saying but your terms need a little refinement.

        What keeps customers continuing to pay Cable TV Operators for premium services like HBO? Original Series. This has been the case for 20 years and still the number one answer on all consumer based Cable TV programming research. This is why Netflix, Amazon Instant Studio and others are highly focused in that arena. If inroads with Hollywood’s biggest producers are successful (and I am sure they will be) premium content will be in big trouble. Can the current Internet streaming services afford the per episode price HBO is paying now? That is why I mentioned the two examples above. Some can. Some cannot. Those that can are probably already attempting to aggregate those that can’t through buy outs or partnerships. This would make that chart conservative.

        On an a la carte, basic Cable TV networks (like The Discovery Channel) are not in step with being bought this way. Its the entire network getting a per subscriber fee from the Cable Operator that allows for enough revenue to pilot new shows. There will be support from newer struggling networks, but the intrenched ones will push back hard and prevail. The one exception is ESPN. At $4.50 per subscriber, it is one of the largest costs for a Cable operator. I cannot see how this can be maintained. The operator will have to spin it out as a mini-pay service. Then the industry will be the “perfect storm” for a major realignment

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        1. I will continue to pay what ever the cost for HBO, why, no on-screen logo…

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  10. Muddy Mudskipper Monday, January 14, 2013

    In the worst economy in THREE GENERATIONS the pay television market STILL GREW. In 2012 your chart says it lost less than ONE TENTH OF ONE PERCENT! Now, as the economy is picking up a little bit, you’re predicting doom? I don’t think so.

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    1. Have you seen 2012 stats? If not, then go away, or not.

      Again, I’m not denying that pay-TV operators (many of which are my clients) are quite innovative in defending against such threats. With no legitimate replacement competitors (Netflix is not a replacement competitor), they continue to work magic, spinning deals that boggle the imagination (DBS is guilty of the same).

      I don’t care about this moment in time — it is what is and I cannot change it, nor am I focused on the present. It’s all about 3-5 years out, and collective data says we’re heading for a shift. And no, silly person, it is not “doom.” I made that clear in several comments (and please read the, for you’re on good). To claim my argument is “dooming” the pay-TV industry is the most specious logical fallacy, hasty generalization.

      I know it seems a bit radical at this time, but I’m looking forward 3-5 years. I do have a prescription for pay-TV operators to avoid this decline, but in reality it only prolongs the obvious: home pay-TV becomes just an app on a fortified TV (smart in and of itself, maybe; smart by virtue of ancillary devices, certainly).

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