The End of TV as We Know It

While cable companies and networks bicker, consumers are staging a video revolution

  • Share
  • Read Later
Getty Images

Imagine a world in which the producers of buggy whips and the distributors of buggy whips are engaged in a vicious fight over who gets what percentage of whip-sale profits--even as more and more of their customers trade in horses for cars. That's a lot like what we've seen lately as CBS, the U.S.'s most popular broadcast network, has faced off against Time Warner Cable, the nation's second biggest cable company, over retransmission fees, the money paid by cable operators to ESPN, A&E and other channels for programming. While the giants have been busy arguing about how much pipe owners should pay content creators for top shows, viewers have begun unplugging. They are increasingly watching TV over the Internet, where they can get what they want for free (or for a lot less than the $100 or more some shell out for cable and satellite).

It's a phenomenon known in the business as cord cutting, and it signals the biggest change in media consumption since the Internet began killing newspapers over a decade ago. The nearly 1 million households that have cut their cords in the past 12 months represent a fraction of the overall television market, according to a new report by Moffett Research. But that's double the number that bailed the previous year. What's more, pay-TV subscriptions, which have fallen for the past few years, had been expected to rebound as the housing market improved, since people often order service when they move into a new home. But now housing is up, and pay-TV penetration is still falling. "Cord cutting used to be an urban myth," says telecom analyst Craig Moffett, who is advising clients to sell a number of cable and telecom stocks, including Cablevision and Verizon. "It's not a myth anymore."

It reminds me of the tipping point several years ago when people realized they no longer needed a telephone landline and would do just fine with their cell phones. According to Forrester Research, 32 million consumers are already getting video over their televisions using Internet devices--including game consoles like Microsoft's Xbox, connected Blu-ray players and smart TVs made by electronics giants like Samsung and LG, and set-top boxes from companies like Apple. As these devices proliferate, the pace of cord cutting will accelerate. A recent study by the Diffusion Group found that consumers with Internet-connected TVs were twice as likely as other consumers to cancel their pay-TV services. Even those of us who have bundled TV and broadband-Internet subscriptions from telephone or cable companies increasingly use them to binge-watch Netflix shows like Orange Is the New Black on an iPad (in bed while enjoying a pint of salty caramel ice cream--not that I would know) rather than flip through 500 channels to find nothing on. As we've seen for decades, media-consumption habits evolve much faster than old media do.

  1. Previous Page
  2. 1
  3. 2