As the internet tornado storms through media companies, leaving fallen businesses and declining profits in its wake(newspapers in particular), cable tv and satellite companies look to be next in line. I have been saying this to friends for a while now, but I finally have some numbers to back my theory. TechCrunch is reporting that nearly 800,000 Households have abandoned TVs for web services such as netflix and hulu.
I believe this to be only the tip of the iceburg. The article mentioned how the number of people who have made this decision makes up less than 1% of people who subscribe to satellite and cable. I remember when newspaper executives were throwing out similar numbers back in the late 90′s. Which was about as reassuring as Kevin Bacon’s character in Animal House saying “Remain Calm, All is well!”.
Despite all the handwriting on the wall over the past couple years, Cable TV executives seem content to just let their companies get hit by the storm, rather than adjusting their business models. One thing is for sure. What they are doing now will not work for much longer. You may have noticed a lot of disputes coming up lately between tv networks and service providers. The most prominent of which, is when ABC 7 New York actually shut their channel down on Cablevision over a contract dispute, a night before the Oscars. A deal was settled right after the Oscars started. But the point is that tv networks are realizing that they have many other ways to reach their customers now.
The obvious difference between newspaper and TV is that it’s much easier to replicate words on the internet than video. Not to mention that intellectual property restrictions are much tighter on multimedia content than they are on newspaper copy. But eventually technology always catches up. And now it is doing so at a rate which should make TV service providers nervous. Hulu, Netflix, Itunes, Youtube, can all be broadcast on ipads now. Networks are allowing users to download their popular shows directly off their web sites. And people are finding ways to hook their devices into TVs, so they don’t even need to watch it on small screens anymore.
As these trends continue, Cable TV companies will be getting squeezed and their years of contentment (and perhaps the worst customer service practices of just about any industry) will come back to haunt them. People accustomed to waiting hours for a cable guy to keep an appointment, will have no problem give their tv service providers the finger in favor of something over which they have more control.
If there is a smart way for cable/satellite companies to embrace the internet, then it would certainly be up to people smarter than myself to decide that. I would guess that Service providers may start offering more on-demand options for movies and shows and to improve their very clunky DVR systems. But most importantly, they need to start repairing their severely damaged relationships they have with their customers. They’ll need to consider lowering their rates and offering their customers more flexibility. How about letting people customize their own cable channel lineup? They’ll need to give customers more reasons to stay loyal in the face of having many other options. As the web gives customers more control than they have every had, overly bloated media companies are losing their once powerful monopolies. We have started to see some modest turnarounds for newspapers, and that is because they own content/intellectual property that still has some value. Cable/Satellite companies really provide no original content and don’t have much to fall back on when the hammer strikes down on them. And that hammer will come down. It is only a matter of time.
I’ll be following this story closely.
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