TV isn’t going anywhere, but the way that it is to be distributed and the way viewers engage with it is changing radically.
Credit Suisse Analyst Stefan Anninger has forecast a 200,000 subscriber loss for the US pay television market, while also claiming that youth are revolting against expensive channel packages. Anninger suggests that young people today aren’t ‘cord cutters’ (the practice of cancelling cable TV subscription in favour of streaming services like Netflix and Hulu), but are never subscribing to begin with.
Anninger also states that young people have grown up in a world where the Internet provides video content free and/or cheaply with video content that is being watched on multiple types of devices (many with small screens) at low, but acceptable, resolution.
The only way for cable television companies to survive in this new consumer-driven environment is for the companies to “offer consumers lower-priced choices, for example packages that include fewer channels than operators pack into their popular expanded basic services”.
Services like Netflix and Hulu provide easy access to high grade and niche content on demand. There may be a lot less content than is available through a traditional cable TV package, but with each offering a very low price point and just enough decent content to always have a viewing option, they provide a compelling reason not to buy an expensive pay television subscription.
Youth isn’t the only threat to the existing pay television structure. Rumours of Apple launching a Connected TV device continue to gain momentum. 9 To 5 Mac report today on rumours that Apple have signed a deal with Sharp to manufacture the hardware for an Apple television (not to be confused with the existing ‘Apple TV’ product). The article is quick to dismiss the validity of the report, citing concern that it originated with the dubious Tokyo Times website.
While an Apple television would severely upset the current cable television fuelled paradigm, it lends itself very well to the sort of consumption that is so prevailent among younger consumers (as cited by Stefan Anninger). Much like with the video services/portals being launched for use on the iPad, we’re no doubt going to see a number of cable TV brands shift toward on demand connected TV offerings distributed via the Apple television. The TV interactivity promised for years by subscription TV providers (ie shopping, games, news on demand, etc) is a reality through a platform like this.
While the future for local TV broadcasters seems a bit bleak at times, I wouldn’t entirely write off local broadcasters just yet. Firstly, even when an Apple television launches (followed by an Android TV, Windows powered TV, and others), it’ll take a few years for innovative TV distribution channels to launch locally and when they do, it’ll take longer still for rights to be negotiated to many favoured programs. Secondly, for subscription companies like Foxtel, it is a given that they’ll adapt to the new marketplace. It won’t take much for Foxtel to shift toward developing targeted niche brands to target younger viewers hesitant to spend as much on subscription television.
The distribution channels and models may radically change, but that won’t stop the major players today from being in a position to continue to own the space. Adapt and survive.