Older And Newer Media Are Eating Cable Television’s Lunch

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Cable television is caught between the jaws of a vise. One jaw, says the Washington Post, is a newer medium – the Internet, with its instantaneous social-media news bulletins and streaming longer-format shows and movies. But the other jaw is an older medium – one which it looked for several decades that cable would replace, namely, over-the-air broadcast television (OTA, as it’s known for short). More than 12.3 million households “depend solely on over-the-air broadcasting for their live TV viewing” according to Nielsen audience research, the Los Angeles Times reports. That’s just 11 percent of all television homes, but it may be only the beginning. There’s also this number from Nielsen: From the end of 2013 to the end of 2014, the number of US homes using a combination of broadband and OTA for their television viewing grew almost 10 percent, from 5.6 to 6.1 million.

OTA’s threat to cable is partly economic, but mostly demographic. While some homes are abandoning cable because they can’t afford it, writes Stephen Battaglio, “a growing number of [cable-cutters] are millennials who use over-the-air TV for live sports and broadcast network shows on ABC, CBS, NBC and Fox[,] while getting a wide array of programs from streaming video services such as Netflix, Amazon and Hulu. They are happy to pay for broadband Internet, but not TV.” When the National Association of Broadcasters gave away 1,000 TV antennas last year, notes NAB evp Dennis Wharton,  the Washington, DC, event attracted not only “people who disconnected their cable or satellite TV service to save money,” but also “plenty of congressional staffers and millennials who have taken to over-the-air viewing in the way they have made vinyl records hot again in the music business.”

For consumers and advertisers alike, broadcast technology has severely eroded a cable superiority over OTA – the number and variety of channels. While analog OTA could offer at most a dozen channels – and that many only in a very major market – cable offered hundreds. But the 2009 switchover to digital OTA has freed up spectrum, which broadcasters are starting to use, with dozens of new digital channels. For viewers, this means more to watch for free. For advertisers, it means better ability to target audiences demographically and psychographically, according to program content, just as they now do with cable. Particularly in major markets like Los Angeles and New York, OTA is a very efficient medium for ethic advertisers, with a wide range of non-English-language programs and higher penetration among Latinos (16 percent) and Asian Americans (15 percent) than among the population as a whole.

The other jaw of the vise is the Internet, which has been crushing cable ratings, particularly ratings of cable news channels. Combined viewership for Fox, CNN and MSNBC has fallen 19 percent overall since 2009 (coincidentally the year that OTA went digital), 26 percent during prime time. MSNBC alone lost 14 percent of its overall audience and 8 percent of prime-time viewers last year. With fewer viewers for the category, cable news channels are fighting for bigger slices of a shrinking pie. Cable and satellite televiison is a mature industry; few, if any, new homes remain to be hooked up. But while cable penertration is, at best, static, “fast Internet connections have exploded, shifting the demand for instantaneous news from TV sets to smartphones, tablets and desktop computers. With its lengthy, linear storytelling style, cable news seems poorly adapted for social media, which emphasizes bite-size, shareable stories and clips.”

And cable news channels could very well be only the first of the falling dominos. Business channels (CNBC, Fox Business, Bloomberg TV), tabloid channels, and even that staple for reaching business travelers, the Weather Channel, are also hurting. After all, when was the last time you turned on your television for a fairly recent weather report instead of clicking on your smartphone, tablet or laptop to see what the weather is right here and right now?

You wouldn’t know it from the cable channels’ balance sheets, though. That’s because while advertising revenues are based on audience size, they’re far from the main source of cable television revenue. That source is carriage fees – the sum that cable and satellite systems pay the cable channels to carry their programs to subscribers. Those were set years ago, when cable audiences were bigger; when the contracts run out, cable channels can look forward to some aggressive renegotiation.

Some cable system operators are already starting to, in effect, abandon the cable channels that were once their raison d’être; Cablevision, for example, has started packaging broadband Internet with OTA antennas. And cable channels, such as HBO, have developed an Internet presence with streaming programs and partnerships with Amazon video. But while many consumers will find commercial-free HBO content worth paying subscription fees for, the same can’t be said of, say MSNBC.

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