Linear TV has been having a tough time lately. Although rumors of its imminent demise are premature, those who confidently predicted the business was not being hurt by cord-cutting, for example, are being proven wrong. Long time sales executives, greatly respected by the industry, are being shown the door as sales revenues decline. As with poet T.S. Eliot’s Prufrock, I have seen Linear TV’s moment of greatness flicker. Here are some of the reasons why:
Wishful Thinking on Cord-Cutting
Back in 2013 at the VideoSchmooze Online Video Forum, industry analyst Craig Moffet stated that cord cutting de-accelerated in 3Q13, meaning that it was going down, unlike what was reported in the mainstream technology press at the time. According to Moffet, the fact that it was misreported as accelerating, “speaks to a desire in the tech press for parables – overthrowing the oppressive MVPDs. But the math tells you otherwise. There is no question that people are cutting the cord but it is not a torrent. It is a trickle.”
Obviously that was wrong. Less than three years later, the cord-cutting spigot went from a trickle to a rush and now in 2019, Mark Huffman writes that, “eMarketer predicts that the number of pay TV households in the U.S. will drop by 4 percent by the end of the year to around 86.5 million homes. It further expects the free fall to continue, with pay TV subscriptions falling below 80 million by 2021.”
Lesson: We have to stop feeling that others are out to get us and focus instead on the reality of the trends … and act.
Over-Confidence in the Loyalty of the Viewer
How many times have I read that today’s viewers still watch lots of live TV? In June 2019, the NCTA released the results of a study that showed that two out of three adults watch TV live. “Notably, of the people who said they watch TV live on a regular basis, two out of three (66 percent) are most likely to watch via a pay TV service such as cable. While apps and smart TVs are clearly on the rise for many, and especially among younger generations, the majority of people still favor sitting in front of a television to catch the latest episode of their favorite show, to stay up to date on the news, or to keep up with sporting competitions.”
But the Nielsen numbers tell a different story. According to Marketing Charts, which analyzes Nielsen’s viewing results, 3Q18 was the first quarter on record in which 18-34 traditional TV viewing (live + time-shifted TV) dropped below 2 hours per day and declined 23 minutes per day compared to 3Q17. The article stated, “In percentage terms, the amount of time 18-34-year-olds as a whole spent watching traditional TV (live and time-shifted) in 3Q18 dropped by about 17.2% from the previous year. Needless to say, that’s a huge chunk – a drop of about 1 in every 6 minutes in just a single year.”
So what is happening here? Digital has supplanted traditional TV for youth. In the same study, Nielsen reported that 18-34-year-olds “spent one hour more per day in 3Q18 using apps and the web on smartphones alone than watching traditional TV.” And notably, many 18-34s don’t watch traditional TV at all – only 73% versus 86% of all adults.
Lesson: Traditional TV is less important to younger viewers and time is on their side.
Dog Paddling to Retirement at the Networks
The inability of some top management at some companies to risk implementing momentous change (possibly forfeiting short term profit or even courting failure) is the silent killer of the network business model. Sometimes it is because the system rewards short term efforts – bonuses are bestowed on an annual basis based on the year’s performance. Sometimes it is from sheer shortsightedness where they just don’t see how innovations can help their business. Whatever the reason, these folks stick to the status quo, essentially dog paddling to retirement.
Without naming names, one company who didn’t see the value of set top box data 12 years ago is now struggling to catch up to the data wave and, perhaps somewhat relatedly, just reported an 11% drop in the company’s U.S. advertising revenue.
Lesson: Think and act long term, even if you are not around to see it.
“We have lingered in the chambers of the sea
By sea-girls wreathed with seaweed red and brown
Till human voices wake us, and we drown.” – Prufrock