A Story: Every summer, we go down to the Delaware shore with another family. Every summer, the TVs in the great rooms have gotten a decent amount of use, something for the kids to watch in the morning over breakfast or in the hours between the beach and dinner. But not this summer. In both houses, the TV was not turned on. It wasn’t that the kids (and there are 5 in total, ranging in age from 10 to 17) are spending all their time reading. It’s that whatever “television” they want to watch is available via their smartphones, laptops and tablets. There’s no more need for the actual television set.
A Fact: Q2 2016 has been the worst ever for the pay TV industry. They’ve lost 812,000 subscribers from Q1. That this represents just 1% of all pay TV households is relevant, particularly given that Q2 is when families and students move, severing their pay TV subscriptions and sending sub numbers south. But just as relevant is the stat that there are now 1.4 million fewer pay TV subscribers in Q2 2016 versus Q2 2015. That’s still just a drop in the bucket, a mere 1.5% of the market, but it’s a very noticeable drop.
A Theory: Cord cutting doesn’t have to become an issue. So long as the MVPDs control broadband access, they have it in their power to stop cord cutting. They can do this by acknowledging that the way people watch TV is changing dramatically. That while live video may be making a comeback, most people don’t want to watch TV on someone else’s schedule most of the time. That for young people, the whole notion of a predetermined schedule is anathema and that services like Netflix and Amazon are not going away.
A Challenge: As we discussed recently in Battle of the Century: Apps vs TV Everywhere, the MVPDs have it within their power to create a TV Everywhere ecosystem that’s every bit as easy to use as apps like Netflix and Hulu, that’s powered by recommendations, that is free for pay TV subscribers and reasonably priced for those who want OTT-only plans, and that still allows the networks to reap the advertising revenue they need to stay afloat.
A Prediction: The monopoly the MVPDs have over video-capable broadband access won’t last forever. The disruption might come from the FCC enforcing some variation of “Unlock The Box,” their proposal to allow third-party manufacturers like Google to make set top boxes. It might come from mobile carriers, when we get to more pervasive 5G or 6G. Or it might come from VCs, buying up (and merging together) smaller providers and giving them the money to mount a real challenge to the incumbents. It will happen though, as monopolies don’t last forever, and so the sooner the MVPDs ensure their offerings are user friendly, the better their position will be when the meteor finally hits.