Butterflies Or Blips?

A report came out yesterday afternoon which got me to think again about the changing television business. Coupled with a few other things going on, I wonder if they’re the harbingers of some sort of butterfly effect in the media business or if they’re just aberrations. Let’s see what you think.

Cable tv

(Photo credit: Wikipedia)

The report is from the Leichtman Research Group (LRG) and it showed that video subscriber gains in the first quarter of 2013 by top U.S. service providers were not enough to avoid a first-ever net subscriber loss in the category over a four-quarter period.  In other words, fewer people signed up for pay TV – which is pretty much any kind of cable or other video service – than cut one off.  As Multichannel News reported:

Leichtman attributed the downward trend to a combination of a saturated market, an increased focus by service providers on acquiring higher-value subs, and seeing some consumers opt for a “lower-cost mixture of over-the-air TV, Netflix and other over-the-top viewing options.”

So that’s one thing – cord cutting.  Is it overemphasized by many at this point?  Probably, but when you see something happen for the first time ever, you need to pay attention.  Then there is the bill submitted by Senator McCain to use regulatory incentives to encourage programmers and distributors to unbundle their channels and offer a la carte programming.  This means that if you don’t watch a channel you wouldn’t have to buy it as part of a bundle.  So if you’re effectively paying $5 for ESPN as part of a basic cable package and don’t watch it or want it available, you might get a price break.  Then again, those of us who do watch it might be paying substantially more each month as the user base diminishes.  Do I think the bill will pass?  Probably not since the idea has been around for years.  However, it might just be another butterfly flapping its wings, especially given that there are many more options for video (see point 1!).

Finally, ESPN cut staff yesterday despite record profits.  One would assume they know what their projected P/L looks like and they have committed a lot of money to rights over the next few years.  Making cuts now ahead of the new rights kicking in can help maintain that profitability   Again, another butterfly but pair it with the potential for ala carte cable and fewer pay TV buyers, and then ask if these are butterflies or just blips?  What do you think?

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