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Cutting the cable cord: Will the online media boom mean the death of TV?

March 28, 2015 at 3:34 PM EDT
Over the past five years, more than three million American homes have canceled their cable subscriptions while plenty more have signed up for online streaming services to control when, where and how they watch their favorite shows. Now, some of the biggest players in television are looking beyond cable by offering services that bundle and stream programs without a cable or satellite hookup. NewsHour's Jeff Greenfield reports.
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JEFF GREENFIELD: This was the American cityscape when television was new: forests of rooftop antennas, capturing signals over the air from a half-dozen channels that fought for space on a crowded broadcast spectrum. Turning those signals into flickering, sometimes ghostly black and white images on small screens.

For almost 90 percent of today’s homes, television comes to us through cable or telephone wires or via satellite. Our cable bills bring us a so called “bundle” of more than 900 channels, But most of us watch an average of only 17.

And now, more and more viewers, unwilling to pay ever-higher fees for a huge “bundle” of choices they rarely use, are turning to a new technology that may threaten the very foundation of the cable TV industry. Over the past 5 years, 3.8 million American homes have cut the cord – cancelling or refusing cable.

Younger viewers, so-called millennials form a growing class of cord-nevers, rejecting the cost of a monthly cable bill, they’ve turned instead to broadband, high-speed internet connections and a range of streaming video services to watch what they want, where they want, when they want.

We didn’t have to go far to find a prime example. Hannah Yi is a 31 year old producer for NewsHour Weekend, and in fact, is one of the producers of this piece. And she’s a TV producer, remember, she doesn’t have a television set.

JEFF GREENFIELD: Why are you not tempted, do you think, to buy yourself a television set and hook up to cable?

HANNAH YI: I think it’s because I already have ways to watch what I want to watch without a television.  I have my phone.  I have my iPad.  I have my laptop.

And I feel like, with good broadband, I can pretty much get everything that I need to see on those devices. And so I don’t feel the need to go out of my way to buy a TV, let alone pay a cable bill.

JEFF GREENFIELD: Her 9 dollar a month Netflix subscription brings her not just movies and older TV shows, but original offers like “House of Cards” and “Orange is the New Black.”

Like many of her contemporaries, Hannah – to put it politely – borrows a friend’s password to watch HBO shows like “Game of Thrones” and “Last Week Tonight.” Another 8 dollars buys her Hulu Plus, which lets her see shows from traditional broadcast channels, although not when they’re originally broadcast.

HANNAH YI: Modern Family is an ABC show.  I get that on Hulu Plus so I watch that on my iPad. I’m not watching it with the rest of America, but I am still able to watch it easily on my devices.

JEFF GREENFIELD: Hannah isn’t alone in using Netflix, Hulu Plus or Amazon. A recent Nielsen report found that over 40% of American homes subscribe to at least one of these services.

For those unlike Hannah Yi, who do have a TV set, 50 dollars buys them a Roku, a simple piece of hardware that brings those online offerings right onto their high definition televisions.

And there’s evidence that this new technology is having a serious impact. According to Nielsen, viewership of traditional TV dropped 4 percent last year. Meanwhile, time spent viewing streaming video is up 40 percent, a dramatic increase in online viewing.

In response, something like a California gold rush has broken out, as many – perhaps most – of the biggest media players are offering services that don’t require a cable or satellite hookup.

Apple, Sony and The Dish Network are among those looking to offer their own streaming subscription services, bundling about 20 channels – featuring entertainment, sports and news programming – for 20 to 50 dollars a month. Roger Lynch, CEO of Sling TV – Dish’s streaming service – explains the rationale.

ROGER LYNCH: We’re going after millennials and cord-cutters and cord-nevers.  So, really people for whom the traditional pay TV bundle doesn’t meet their needs.

JEFF GREENFIELD: With so many players looking beyond cable, a key question arises: does this portend the death of TV? Will this medium go the way of music, where records and CDs are all but extinct, or newspapers, finding it ever harder to survive in print? Well, it depends who you ask and what you mean by death.

Earlier this month HBO’s chief Richard Plepler announced a $15 a month streaming service, to be delivered through Apple devices, that set alarm bells ringing.

JEFF GREENFIELD: When HBO announced that you were going to bring this new service to the public, one of the first reactions out there was, “Aha, this is the canary in the coal mine.  The cord is being cut.  This presages the ultimate death of cable.”  True?

RICHARD PLEPLER: No, highly overwrought. Listen there are 70 million homes in the U.S. that don’t take HBO and one of the things we think about all the time is how do we go and bring those 70 million homes into the HBO family.

So we wanna do that through kind of multilateral approach. We’re gonna work with our cable operators. We’re gonna work with our satellite distributors. We’re gonna work with our telco distributors.  And we’re going to add digital distribution to that outreach.

JEFF GREENFIELD: Indeed with 46 million cable and satellite TV homes subscribing to HBO, there’s a huge economic incentive for the network to stay with cable. It’s the same logic for sports giant ESPN, which earns some 6.5 billion dollars year just from cable subscriber fees.

That is a powerful reason to remain in the cable universe. As for those who are looking to save money by dumping a cable package, the advantage to cord-cutting may not be all that clear, says The Atlantic’s Derek Thompson.

JEFF GREENFIELD: Even in cutting the cord, they’re still gonna be paying $40 a month, say, to Time Warner just for the internet.

DEREK THOMPSON: Right.

JEFF GREENFIELD: But now you add Sling.  That’s $20 a month, I mean, when you start adding this stuff up, it doesn’t look like these cord cutters are gonna be saving any money.  They might actually end up spending more money.

DEREK THOMPSON: Yeah.  Some people are not going to save money.  Some people surely are going to think that they’re beating a system but ironically are going to pay more for it.  But there’s a lotta people and they’re gonna say, “I don’t wanna spend $100 a month on entertainment.

Instead I just want to have Netflix.” And there you’re only spending about $10 a month.

JEFF GREENFIELD: There is, however, is one wild card to contemplate. What is mostly “streamed” via broadband is more or less traditional, recognizable fare: big-budget dramas like “House of Cards,” repackaged TV shows via Hulu Plus.

But Craig Moffett, who’s been analyzing the industry for years, notes that the cord cutting and cord-never millennials are actually often watching something very different.

CRAIG MOFFETT:They’re existing in an entertainment ecosystem that operates entirely outside of the pay TV system that we know today.  It’s content that’s developed for tenth the cost per hour of traditional content.  And it’s not distributed via cable and satellite operators.  It’s distributed by social media companies.

JEFF GREENFIELD: Moffatt’s talking about videos that you can watch without a TV like “Between Two Ferns” Zach Galifianakis’ interview show on the “Funny or Die” website. Or “High Maintenance” the sitcom about a marijuana dealer on Vimeo.

Millennials are also watching video clips on YouTube and the video messaging app Snapchat. That’s one reason why HBO’s new streaming service includes a daily half-hour newscast from Vice, a distinctly nontraditional form of journalism.

CRAIG MOFFETT:If you went to media companies five years ago or even three years ago and said, “What happens when the millennials go through a life stage change, when they have children, when they get married?”

They all would have said,”All of these millennials are gonna come flooding back to pay TV.”  They’re not so sure anymore.  Millennials are disengaged from the entire ecosystem.

And having children isn’t gonna make them suddenly abandon Netflix and go back to pay TV.  They’re simply gonna find their programming through a different venue.

JEFF GREENFIELD: So does this new media landscape really point to the death of TV? Well, Jay Yarow, who writes a regular Death of TV column for Business Insider, says this:

JAY YAROW: There’s still millions of people tuning in to TV shows. With any conversation around the death of anything, you have to keep in mind what the “death” really means.  It doesn’t mean it goes to zero, and goes away, and disappears entirely.  What it means is it probably goes into decline, or it goes flat, it goes sideways.

JEFF GREENFIELD: If you’re betting that TV as we know it won’t be around ten or even twenty years from now, you’d likely lose that bet. And the giants like ESPN or HBO will likely survive no matter how their signals come into our homes.

But if millions more turn away from the cable bundle, it’s a very good bet that many of the smaller, specialized networks that depend on that bundle will be endangered species.

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