The Gradual Self-Implosion of the American Cable Industry
30 Aug, 2013
Three PayPal workmates, Chad Hurley, Steve Chen, and Jawed Karim, file for the domain name “www.youtube.com”. Two months later, on April 23rd, the first video is uploaded to the site. A year later the site averages 100 million views and 65,000 uploads a day.
In Philadelphia, Brian Roberts, chairman of the largest telecom company at the time, Comcast, tries to forget that his attempt to acquire Disney earlier that day had fell through. Little does he know the new age of media had also just begun.
I personally qualify the beginning of our modern era of media consumption with the dawn of YouTube. YouTube filled the gap that we had in the early 00s/late 90s of “Alright, we have the internet, now what”. With YouTube we slowly began to share massive amounts of media, whether it be videos, or music, that we hadn’t previously been able to unearth. Music videos, or live concerts from the 50s, 60s, 70s, and beyond that we previously thought to be lost, are now at the will of our keystrokes. With internet streaming speeds now exceeding data rates never before seen, and buffering becoming a thing of the past, we could now find an alternative for entertainment that did not come from a television.
Digital television was thought to be the game changer in order to keep the unruly customers at bay by taking on the shape of satellite programming. Instantly consumers could have a full color menu to toggle through, and 150+ channels to choose from. The media giants were thriving on their increased popularity and cash was coming in like never before. Basic economics of supply/demand meant that they could begin raising the price and people would keep paying. All this boiled down to what I believe to be the most essential building block for television shows getting increasingly better over the past decade.
As I mentioned in my last article, television shows these days are like crack. We start a show, let’s say Breaking Bad, and then we can’t imagine life without it. This idea helped Comcast, Time Warner, and the like to keep their customers out of the hands of their competitors. People start their HBO subscription and then never quit it because they’d have felt slighted if they couldn’t watch The Sopranos series finale. It keeps us feeling complete… in a twisted sort of way. But then we entered the recession. Still the cable companies paid no attention.
In late-2008, we began the worst economic crisis since the Great Depression. Unemployment skyrocketed, and the average American’s wallet just got tighter. That $150 cable bill doesn’t look so appetizing anymore, does it? Prior to this era of online media, we might have gotten rid of our cable bill and probably pick up a book, or maybe begin putting together model cars. However, in the year 2008, we also had Hulu, as well as streaming of popular shows on network cable websites. Back then these were so-so services, but it was at least bearable to cancel a cable subscription knowing you had an ideal back-up. But an even bigger player was just starting up at this point. Still the cable companies paid no attention.
The Netflix Watch Instantly service was in its infancy in late 2008. However, it landed a major account in Starz. This meant, that for the first time, we could at least wait through a whole season of programming knowing that for only $10 a month (back then), we could eventually watch it again. Waiting a whole season for a show to be released is never ideal, but in lieu of saving almost $1500 a year while on the unemployment line, it’s the most welcome present you could ask for. Pretty soon Netflix would be signing a contract with HBO (which went away eventually), and their customers were eating it up (let’s forget the whole Netflix Subscription Faux Pas of 2011 happened… they did recover after all). This garnered the attention of online-retail giant Amazon. Amazon then began to offer an even better deal which was integrated into its purchase system. Still the cable companies paid little attention.
Now we get into 2012. People are starting to get back on their feet financially, however, they’re now more wary than ever about releasing their available cash to cable companies. Heck, they survived this long without cable, why not just put that expendable money into a nest egg as the economy is still teetering. More and more online services keep popping up. NetFlix announces that they will be opening a studio. Amazon already has a studio. YouTube users are now getting so advanced that can monetize their channels by their weekly content, prompting YouTube to announce its own studio opening. Many other former YouTube-ers are now beginning their own media start-ups. Psy gets 1 billion hits. People are digging internet content. Why would we need to pay more for a cable subscription? Still the cable companies hardly any attention.
This year, 2013, is the year where the Earth is sliding from underneath the media giants. Much like a backyard garden, or figuring out the intricacies of bio-diesel, cord-cutting is now truly a self-sustaining way of life. We don’t need cable. We can watch sports on ESPN (Espn3.com; with an applicable internet provider), movies on NetFlix & Amazon, on a Hulu Plus subscription, and we can find a generous friend with an HBO subscription who might gladly accept a few dollars for access to their HBOGo account. Add this all up and for around $65 a month (including internet subscription at average $35), you can access [almost] everything you had with a full fledged cable subscription. This is one third of the average cable bill nowadays. And still, the cable companies pay no attention.
I’ve had many mis-adventures with cable companies. I think we all have. But a few weeks ago I had had it with Time Warner. We’ve heard of media feuds before. The ads that pop up during Mad Men saying that Verizon will stop coverage of AMC if they don’t come to a deal. Yada, yada, yada. But Time Warner legitimately dropped CBS… CBS! A network that we can get for free over the air. One of the original networks created at the dawn of cable. On top of that, they dropped Showtime dead in the middle of Dexter, and right before Homeland.
So I call, like I have many times before, but this time when I speak with the supervisor, instead of yelling, I give a meaningful soliloquy. I say soliloquy, because I know that nobody is on the other side that cares. I told him that I know people who work, own, and contribute to online start up companies whose sole intention is to put said cable companies out of business. Guess what? They’re on their way to winning. People have had it up to their eyeballs with paying premium prices for sub-par service. Time Warner plays the blame game on CBS, but why don’t Verizon, Comcast, DirecTV, & Dish have the same problem? The consumer is finally winning, as they should. They don’t want to have to deal with calling the cable company anymore.
Cable prices have increased close to 3% more than the rate of inflation in the last decade. I look at the numbers from these companies and ask myself, why? They have tons of cash on hand. Why can’t they keep their prices down and try to COMPETE, you know, like you’re supposed to in a free-market. Post-recession, we’re a smarter, thriftier group to cater towards. We don’t want to get rid of cable, believe me, but we CAN live without a cable subscription AND keep up with our shows on a regular basis. It’s possible.
The most important thing that I believe is that two to three years from now, the media industry is going to look back and wish that they had 2013 back. This year, the game changed, and they sat blindly on the sidelines thinking they were still on top. They’re going to wish that they had paid attention sooner. This year, for the first time in its history, cable subscriptions have declined to a little over 0.6% in the last year. A number that will surely grow exponentially in the fall quarter. Their monopoly is slowly coming to a close, and still they pay no attention.
And why is that?
Because ignorance is bliss.