I spent 23 years of my professional life working for TV companies. I miss them sometimes. Then again, when I come across some of the information I’ve been seeing over the last couple of days, I wonder if there will be anything left to miss in a few years. The business model I learned and practiced in my youth is rapidly becoming unworkable and the media landscape that’s emerging calls into question the viability of the entire system. Let me explain.
Let’s begin with the basic premise. The TV business is about aggregating eyeballs to sell to advertisers. Yes I realize that extracting (some might say extorting) payments from cable operators has become almost as important a part of the business as the old ad model, but once the audiences disappear those payments might be jeopardized. After all, if you pull your signal from a distributor and no one cares, where is your leverage? The bundled model in which consumers pay for networks they receive whether or not they watch them has been a bit of a safety net for many outlets. If the system “unbundles”, what happens?
That’s why a few bits of information paint a grim picture for my business alma maters. This from GigaOm:
TV viewers are abandoning traditional broadcast and cable networks for online streaming services, and new devices in their living rooms are making it easier for them to cut the cord. That’s the gist of two new studies from Nielsen and GfK.
Or the Wall Street Journal:
Viewership of traditional television dropped nearly 4% last quarter, as online video streaming jumped 60%, according to a new report from Nielsen, crystallizing a trend for TV-channel owners amid ratings declines.
What effect does that have? Business Insider says:
Data from The Standard Media Index — which claims to pull 80% of US advertising agency spend from the booking systems of five of the six global media global media holding groups, as well as some independent agencies — shows that television ad spending showed a “considerable drop” in October, and was down 9% on the same period last year.
Streaming video viewing was about 4.8% of the time spent on traditional TV. A year later it’s almost 8%. Still small, but Nielsen doesn’t measure Netflix viewing (which is by far the greatest source) on anything but PC’s. Quite a bit is viewed via tablets and over-the-top devices so this number is understated.
Is network and cable TV at the end-times? No, but it’s not unthinkable anymore that those times could come. CBS has launched a stand-alone streaming service, as has HBO. One can’t help but wonder what happens when ISP’s, many of whom own traditional networks, stop (allegedly) throttling services like Netflix or eliminate usage caps. Add the dawn of the “ala carte” era in cable packages and suddenly the TV world looks very different.