Cord Cutting, the Demise of the Cable Industry

As we have been discussing throughout the blog, the world we live in is being rapidly disrupted, and the TV and cable industry is not immune to this as people are “cutting the cord” and moving away from cable.  There have long been alternatives to cable, but now they are finally becoming practical and affordable to the general public as people are tiring of being bullied by cable companies by being charged obscene prices for, most of the time, bad service.  This has led to the cord cutting generation canceling their cable subscriptions and moving to cheaper alternatives to watch their favorite shows.

Services like Chromecast used to be considered a luxury, but now that they had added more selections and become more affordable, these services are becoming more and more popular.  Adding Chromecast to your home for $35 along with a few other complimentary services that fit your viewing pleasures can still save consumers hundreds of dollars each year, as the average cable bill comes in around $65 per month.

On top of Chromecast, Netflix, and Hulu, Apple TV is in the midst of launching a “cable-killing app.”  Apple is currently negotiating with CBS, ABC, NBC, FOX, and each of their local affiliated networks to get the rights to each of their live TV streams.  Subscribers to Apple TV will also be able to receive their favorite channels, including ESPN, Discovery, and Disney, just to name a few.  Apple will also have HBO available, allowing them to cover almost every possible platform consumers currently pay the cable companies for.  This is the first time that a “cord free” service will be able to offer live sports, separating Apple TV from the rest of the industry and putting the cable industry in serious jeopardy.  Apple is currently in discussions with the NFL along with Patriots owner, Robert Kraft, to give Apple the rights to broadcast live games on their app.  Currently, Apple TV has the rights to offer NFL Game Pass to subscribers which offers live out-of-market preseason games, as well as all regular season games available the next day, on demand.  If Apple can continue negotiations and get the rights to broadcast live NFL games, similar to Yahoo’s free international broadcast of the Buffalo Bills vs. Jacksonville Jaguars game in London this past weekend, the cable industry will struggle to survive that blow, as Apple TV subscriptions again fall well under the $65 per month consumers pay for cable.  However, until this happens, cable companies still have a huge advantage when it comes to the sports fan because there is not a cord free service that currently offers every option of live sports that viewers can get through cable.

With 12.3 million households, or 11% of television watchers are using cord free broadcasting, investors are beginning to have shaky confidence in the media industry.  Analysts at Goldman Sachs still believe that currently, cable tv is a sound investment, but is becoming much riskier with the advancement of cord cutting and the emergence of the plethora of alternatives consumers can switch to.  These alternatives can be combined to form affordable, inclusive television packages that can cater to each type of viewer and are still cheaper than cable and can be seen in the video below.

 

With all of theses alternatives, cable companies need to learn from past disruption, like Blockbuster, to avoid acting once it is too late and all of their customers are gone.  Cable companies need to act quickly to lower their profit margins, so prices can be lowered and services can be improved.  By lowering prices and upgrading their services to provide better quality as well as features similar to Netflix and HBO, the cable companies will be able to keep all of their current customers and avoid the collapse so many other industries and companies have seen because of disruption.

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4 Responses to Cord Cutting, the Demise of the Cable Industry

  1. Aziz Syed November 15, 2015 at 10:48 pm #

    This is a topic that I truly have a strong interest in. As we have seen, cable corporations have become monopolistic entities that streamline and control the process of getting TV and Cable to the everyday consumer. We see in specific regions there are only one or two providers in the area and they control the market. I have always asked why this is the scenario and how come anti-trust hasn’t stopped this wave in its tracks? The cable company’s answer is simple, they are specializing locally and they offer the best “service to the consumer through that specific region”. In today’s modern technological era, consumers should be weary when they are only offered two or three options when it comes to your television, phone and cable. In an economic setting where only three competitors share a market, the ability to overcharge consumers and extend margins is apparent and has become a growing problem that the millennial generation has taken to Silicon Valley for the solution. Products such as Hulu, Chromecast by Google, Netflix and Apple TV are in the process of creating distribution lines with all the major networks to offer live streaming from their programs. This could potentially see the end of the Comcast style dominance in the communications and media industry as a whole. To put it into perspective Comcast currently operates its division of communications and media at a gross margin of 29%. Meaning that you are highly overpaying for the products that are being provided to every single average consumer on the market currently. Why should we have to pay for services that are currently being technologically advanced by corporations that understand that these types of enterprises are monopolies in hiding scraping every dollar from consumers just because it owns the cable lines for the past 100 years? It will truly be exciting to see the reaction of these communication giants as technology surpasses the infrastructure they have relied on for many years. Many service providers have already begun to increase their quality of service offering better incentives to consumers to align themselves with these communication giants. As these technological leaders move forward to disrupt the industry, cable companies will have to quickly react and adapt to a market they are truly unaware of.

  2. Thomas Batelli February 16, 2017 at 2:17 pm #

    This article certainly grasped my attention, as I am personally aware of how expensive television is. In my household, for basic DirecTV and limited channels, my bill is over eighty dollars every month. Now, this doesn’t include Netflix, which comes in as an extra eight dollars. Count the electric bill and you’re already peeking on or around one hundred dollars a month. How crazy is that! There is no doubt in my mind that cable companies and companies such as DirecTV will be on their way out within the next few years. Devices such as Roku and the Amazon Fire Stick allow consumers to spend a one time price and stream TV shows, Netflix and other popular demand simply by connecting the device to the internet. Consumers pay a one-time charge to buy the product, then they connect it to a USB port in their televisions and within a matter of minutes, they have endless shows and movies at their leisure.

    These “cable-killing” apps are fueling Apple to a world of grander success. Not only does Apple own nearly half of the world when it comes to cell phones and computers, now they are dominating the app world and we will most likely be seeing live streaming grow to be a more common and easier accessed accommodation in the near future. Many of these applications also do not make consumers watch commercials. For example, Netflix allows you to watch series of shows at your own pace and discretion- pausing, rewinding as you please. This app also allows consumers to avoid the twelve commercial breaks you usually experience in one sitting of a television show. This is creating a shaky mentality for many people in the media industry who commonly use broadband cable for the advertisements.

    Cable companies certainly need to stay with the trends, or at least cut their prices down to a reasonable price. With technology moving at such a heavy pace, it shouldn’t be so expensive to provide services to customers. A perfect example of an industry, which boomed in the 1990’ s-early 2000’s, was movie stores. As a child, I remember going to Blockbuster or a local movie store to pick out a movie when I had play dates with my friends. Can you even imagine something like that now? With trends in technology phasing in and out so heavily, it is critical for companies to stay with the times, or they’ll be saying goodbye to their bank accounts. Before they know it, cable companies will be right alongside Blockbuster.

    With all the different alternatives available to cable television, it is no doubt that consumers will start to catch on to the scam of the system. It is also important to analyze concepts of the current as well as the future. When looking at America, technology runs strong and rampant amongst consumers of a variety of ages- toddlers and younger children to older adults. The different devices that are of access to these consumers are endless- iPods, iPads, laptops, computers, kindles, cell phones, tablets, etc. All of these devices have access to the Internet, which most people have inevitably anyways if they have any sort of home telephone. With that being said, it makes more sense for people to utilize devices that they already have and can use for a variety of different tasks, versus one device, which is only used for one thing. Consumers are certainly beginning to catch on to the trends, not only in technology but also in the scams, and lets be truthful-sellers may not be able to fool them much longer.

  3. Erik Peterson September 29, 2017 at 1:04 pm #

    This article’s title had an appeal to me personally, since I tend to watch cable TV maybe once or twice a week. Over the past several years, I shifted my sources of entertainment from cartoon network, ESPN, and numerous other TV channels over to the internet. I almost exclusively get my entertainment from websites such as Twitch.tv, and Hulu. There are many advantages to dropping cable TV, and the article mentions a few more advantages that might be coming our way in the near future. I mentioned Twitch.tv as a main source of my entertainment, because I am a huge video game enthusiast. For those who don’t know, Twitch is a livestreaming website, where you have the ability to watch thousands of “streamers” play video games. This can include regular people who stream as a hobby, people who have taken up their hobby professionally, and large gaming websites that host tournaments. The best part about the website is that it is completely free to the viewers, unless they feel like spending money to support their favorite streamers. I have personally spent thousands of hours watching twitch streams over the past several years, and the best part is, it doesn’t cost me any money. I also get a lot of entertainment from websites like Hulu and YouTube. Recently, I started watching Hulu because they have partnered with music streaming service Spotify, which I also subscribe to. The amount of entertainment that is available at my fingertips at any given time is unbelievable, and I can get it for pennies on the dollar that I would be spending for cable TV.
    There are a few problems with cable TV, which give “cord cutters” a distinct advantage. One such problem, as I mentioned, is price. Why would somebody spend upwards of 70 dollars per month on cable TV, when they can only watch certain shows at certain times (unless recorded), and only have a limited number of channels? Cord cutters can search for any show imaginable, watch it, pause it, and save it for whenever they please, and all at a fraction of the cost. Another problem with cable TV is the people who work for them. Normally, if an issue arises with cable TV, you would have to call the company, be put on hold, and then have a long discussion about what you can do to fix your issue. Even worse, if they had to send out a representative, you would have to wait at home all day for the person to come to your house, and then hope that he fixes it correctly, and no more problems occur. With cable cutting, you don’t have to worry about any of that. All issues will most likely be the fault of the website, and in my personal experience, an entertainment website has not been down for more than 20 or 30 minutes at a time. Also, if the website that you are watching happens to go down, there are plenty of other choices in the mean time to watch while their problem is getting fixed.
    If Apple TV is able to reach an agreement with the NFL and provide streams of live sporting events, I could see the cable companies taking a huge hit. The fact of the matter is, entertainment websites are a whole lot more convenient, cheap, and easily accessible than cable, which will eventually result in cable’s downfall.

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