The TV Revolution: Timing is Everything

There is an old line in the high-tech world that says: “Technology revolutions take longer than we predict, but arrive sooner than we are prepared for them.”

For a decade now, analysts watching the television industry have been predicting the end of bundled television-content delivery—i.e., those packages of networks, wanted and unwanted, that you get when subscribing to cable or dish TV. But that business model has proven to be remarkably durable. Indeed, most Americans still participate in such bundled programs. We have grown so accustomed to this type of subscription that most people assume it is a permanent fact of life, a natural part of television itself.

But events and trends of the last couple months are signaling that, ready or not, the long-predicted revolution in television is upon us. Within the next three to five years the world of television may look radically different from the one we know now. A lot of mighty institutions may fall or rise in the process of that revolution. While the events of the past few months seem significant, they are simply a mild squall compared to the approaching Category 5 Hurricane. And this storm promises to radically change relationships among all stakeholders in the TV business, including station groups, networks, over-the-top (delivery of television programming over the Internet) service providers and, of course, viewers.

Consider these recent news items, each signaling a major change in the TV industry and its customers:

• Ladies First – Last October, the percentage of 18- to 49-year-old women watching TV in prime time fell nine points from the same time last year. And a closer look is even more dispiriting: Tuesday- and Wednesday-night viewership suffered greater losses. If you take out the still-strong viewership by women on Sunday nights, the all-important 18-to-24 female viewership fell off by more than 20 percent.
• Acceptable Losses – Thanks to sports programming, which is still managing to attract male viewers, prime-time TV usage “only” fell five percentage points this season compared to a year ago. The TV world considers this good news. We remember 20 years ago when newspapers were similarly celebrating losing “just” one percent of their readers each year … . Think about it. What’s happened to that industry?
• Trouble Across the Board – These troubling viewership numbers aren’t just clustered around a few bad shows or weak network schedules. Audience erosion is showing up everywhere. According to Variety, A+E Networks has seen a 22 percent audience drop; NBCUniversal, 14 percent; and Disney and Time Warner, 13 percent each, during this period. Only a 12-day marathon of “The Simpsons” buoyed Fox’s ratings.
• A Flat Future – Steve Burke, NBCUniversal CEO, was quoted in Variety as saying, “The fact of the matter is, the next five or 10 years in basic-entertainment cable, as it relates to ratings, are going to be much more difficult than the last five to 10 years. Our big cable channels, particularly when sold as a portfolio, are very attractive and very powerful. I just think it’s unreasonable to assume that the ratings for those businesses are going to grow if you look over a five- or 10-year period.”
• Opposing Directions – Probably the most disturbing news of all is that this decline in pay-TV viewers is occurring even as the number of new Internet subscribers is skyrocketing. According to investment firm MoffettNathanson, subscribers to traditional pay-TV services fell by 179,000 this year, or 96,000 more than during the same period in 2013. At the same time, the New York Post reported that these companies increased high-speed Internet subscribers in the third quarter by almost 800,000.

Writes BuzzFeed, “Taken together, the two data points suggest that consumers are cutting back on costly traditional TV service and opting instead to pay for broadband access to watch video via streaming.” I’d go even further: These numbers suggest that pay television is missing a shift in the zeitgeist, losing not just young people, but middle-aged viewers and even seniors. Many will never come back.

While this potentially looks like the emergence of a death spiral, opportunities abound, especially for those players in the industry who can adapt, and those new entrants that recognize how to fill the emerging voids. The history of technology disruption in media argues that it will be almost impossible for many in the television industry to survive the melee intact. However, some encouraging breakout strategies are starting to emerge. Likewise, as tech history also shows, something new—exciting, fast-growing and technologically sophisticated—will come along to replace it. I believe the answer is already emerging out there in the new reality of Internet streaming and other consumer video services. However, as silly as it may sound, I believe the golden age of television is in front of us, not behind us.

This transition will not be easy. This revolution will be led by brand new companies, few of which we have yet heard from, few of the famous and powerful companies we celebrate today will survive the transition. The great television service of the 2020s—the equivalent of the Big Four networks of the past—is probably one that doesn’t yet exist.

Hang on, it’s going to be a very exciting ride.