Shaving The Cord

You might have heard something over the weekend about a glitch in the Nielsen ratings system that affected the estimated audiences all the way back to March.  While that is kind of problematic for the TV industry, it was other Nielsen data that presents much more of a long-term problem.  As Cynopsis reported:

The top 40 cable channels have lost more than 3 percent of their distribution over the last four years, according to a Wall Street Journal analysis of Nielsen ratings data. How to account for the decline, which exceeds the loss of subscribers? Pay-TV customers are signing up for less expensive bundles with fewer channels, says the WSJ. “What we are seeing is some cord cutting and some cord shaving,” Nielsen global president Stephen Hasker told the paper. “Consumer time and attention is shifting.”

You can read the Wall Street Journal article by clicking through.  As someone who spent a long time in the TV business I understand why channels are bundled.  Way back when, the market was far less fragmented and the business model evolved where there really weren’t tiers other than the true premium channels of HBO and local sports networks.  Today, even the “major networks” of ABC, CBS, Fox, and NBC attract audience ratings in the low single digits even for top programs.  Yes, DVR viewing can boost some of their audiences as much as 80% but think about it.  What’s the difference between watching “Gotham” via Hulu (the internet) or on your DVR (the cable bundle)?  Other than being able to skip the commercials on a DVR, not much.  In fact, one could argue that advertisers would prefer that consumers watch in the non-skippable internet interface.

The real point is that how consumers come to content has changed and yet the people who are the middlemen in offering the content – the cable companies – haven’t moved off a business model that evolved in the 1980s.  As the  Journal sates:

Data points are piling up to show “cord shaving” is for real. At least two pay-TV providers say about 10% of gross TV subscriber additions are customers who are taking a slimmed-down bundle—in contrast to the bigger ones with hundreds of channels that can cost upward of $100 a month.

So the choice for the providers, as it is for all of us in our businesses,  is to change or to shrink.  They can’t just keep raising prices.  At some point that makes the problem even worse as consumers pay more for channels they don’t watch.  What’s your solution?