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Current News The Industry

The Future of TV

Kicking Television
Kicking Television (Photo credit: dhammza)

Laura Martin and Dan Medina of Needham & Company, a branch of an investment banking and asset management firm have issued an analysis on  the Future of TV. There has been a lot of other reporting about this report, most of which zeroed in on the fact that ESPN would need to charge $30 in an a la carte environment. I’ve written several other blogs about the a la carte issue and instead want to highlight some of the interesting facts from the report.

They say that TV is a bargain and that the average family spends 30 cents per hour to watch TV. This is based upon an average cost of $75 for a cable subscription and a family watching TV eight hours per day. I think they miss two points with this. The price of cable has grown much faster than inflation and there are now more and more homes who feel they can’t afford the cost of the subscription. If cable rates keep climbing 6% per year, in only five years this same subscription is going to cost over $100 per month. Also, there are many households who do not watch TV eight hours per day. It is these two groups that are leaving the cable system, the first reluctantly and the second because it no longer feels like a bargain.

TV content is expensive to produce. The four main broadcast networks (ABC, CBS, FOX and NBC) spend an average of $2.5 million to create a prime time hour of programming. To contrast, all of the other 130 or so cable networks spend an average of about $100,000 per hour. But there are new rivals now producing programming. There are a number of companies now producing content for the web and this is expected to grow rapidly. For example, YouTube is spending about $100 million, NetFlix $200 million, Hulu $500 million. And both AOL and Yahoo have created web ‘channels’.

They say that about 80% of content never pays for itself. The TV world is driven by hits since they draw the bulk of the advertising revenue. But hits are ephemeral and unpredictable. The broadcast networks have been geared for decades to product hits and it’s obvious that even with the money that they spend that it’s very hard to do. But the top shows garner the lion’s share of ad revenues. To show the power of hits, the top 1% of movie hits account for 18% of movie rentals / views.

They recognize that TV viewing is shifting in a digital age. They cite the following statistics:

  • 72% of viewers watch content only on a TV set.
  • 11% watch content only on some digital medium such as computer, pad or smartphone.
  • 17% of viewers watch some content in both ways.
  • 61% of TV watchers now use the Internet while watching TV and 10 – 25% of those viewers go to the website of the show being watched (depends upon the network being watched).
  • 29% of the viewers who use the web while watching TV are on Facebook.

The report estimates that over 1 million jobs are dependent upon the TV sector. These are mostly middle class jobs and include cable TV installers, customer service reps, people who work in various roles at the networks. Comcast alone has 126,000 employees. By contrast the new companies trying to make money from web content have very few employees. Hulu has 420 employees, YouTube has 650 and NetFlix has 2,348. The report thinks that most of the traditional cable TV jobs are at risk if we move to an a la carte system.

The public companies in the TV sector have about $400 billion in market cap (investable securities). The report estimates that at least half of that market cap would disappear under a la carte programming. They warn that even having the government looking at a la carte programming puts these investments at risk.

These are just a few of the many facts cited in the report, which is why I have included link to the full report for anybody who wants to read more. Oh, and at the end of the report they recommend buying CBS and AOL stock. If you buy them and it doesn’t work out, you didn’t hear it here.

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Current News Technology

The Battle of the Boxes

Image via CrunchBase

For years we’ve been told that the day was coming when we would be able to get rid of the settop boxes supplied by the cable company and instead use our own smart devices to receive cable TV. A number of years ago the FCC tried to promote this with its cable card order that said that customers must be allowed to bring their own devices and that the cable companies then had to give them a discount for doing so. But cable cards were a massive failure and only a very small percentage of customers went through the hassle of trying to use their own settop boxes.

And then we heard a lot of talk about how TVs were going to get smarter and that we would be able to plug our cable into the back of the TV and eliminate the settop box. And that actually worked for a few years. But then cable companies started converting their systems to all-digital to make more room for faster cable modems, and analog transmissions are quickly becoming a thing of the past.

So we are no closer today to being able to bring our own smart box to the game and almost every home still has a settop box or a DTA (Digital Television Adapter) for which the cable company charges them a fee of around $5 or more per month.

Meanwhile there are a host of new boxes in the world that are designed to help customers bring the Internet and its many programming options to the TV. Among these are Roku, Apple TV and Sony Playstation. There are a number of households that are using these boxes to replace the cable company altogether and are settling for the programming that can be found on the web. These boxes let people subscribe to things like NetFlix, Hulu or Amazon Prime, which are much cheaper than the typical cable subscription.

Time Warner is taking an interesting approach to the battle of the boxes. In March they announced a deal to allow people to use a Roku box in place of a Time Warner settop box. In June they announced a deal that allows customers to use high-end Samsung TVs without a settop box. And it was reported last week that they are making a deal for people to use Apple TV in place of their settop box.

Image via CrunchBase

Time Warner is doing this by developing a specific App that works on each device. A customer can download an app that will let the Roku box mimic the Time Warner settop box and save the monthly fee. It’s reported that the app is not as good as the real thing and the line-up and some reception is not as good as using a TV. But Time Warner sees some advantages to this arrangement. While they lose the typical $5 per month charge for the settop boxes, they also get out of all of the obligations that go with providing settop boxes. No cable provider likes being in the settop box business. They require truck rolls to install and sometimes to retrieve. They break and must be replaced. And a surprising number of people move, pack and take their boxes with them. Cable companies are probably a net winner by getting out of the settop box business.

But I see a few problems with Time Warner’s approach. First, Time Warner is headed down a path that is going to make their software life complicated over time. Soon they will have deals that require them to supply apps for three different boxes. But over time that number is going to mushroom. There will eventually be many generations of Roku and Apple TV and every other current box as they get updated and outdated. And over time there will be dozens, if not hundreds of devices that will be able to get TV signal onto a TV. Looking into the future five or ten years I see Time Warner’s strategy getting very complicated.

But the biggest danger I see is that Time Warner’s strategy is inviting the fox into the henhouse. Do they really want to promote customers to use boxes that bring Netflix and Hulu into the house and make it easier for customers to cancel or downgrade their Time Warner cable TV service? Obvious some people are going to be buying these boxes anyway, but should the cable company be promoting people to buy a box that makes it easier to bypass them? It seems like a risky bet to me.

Even if Time Warner is onto something, this solution is not for everybody. Certainly the handful of other large cable companies could follow suit, but it’s hard to see this working for smaller cable companies. And this solution won’t work at all for companies that deliver IPTV over DSL or fiber like Verizon, AT&T, municipalities and hundreds of independent telephone companies and small CLECs. The IPTV stream requires a proprietary device to descramble the signal (and  scrambling for IPTV is required in the contracts with the content owners), and so these providers cannot move customers to alternate boxes.

Time Warner’s approach is unique and we will have to see if any other cable companies follow them. This is a home run for the box makers, but I’m not so sure that Time Warner wins too.

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Improving Your Business What Customers Want

Local Programming

digital on-demand (Photo credit: Will Lion)

One way to differentiate your cable system from your competition is to develop local programming. Local programming is just what you imagine it to be. It includes such things as high school sports, little league games, local church services, local government meetings, high school plays, and if you have a local college a wide array of things. And it can include more with content like local news, courts, cooking shows, tourist information, etc.

Why should you get involved with local programming? If local programming is done well, meaning that it has content that people want to watch, then it differentiates your cable programming from the competition and entices people to buy your service rather than the other guy. And of course, if customers buy your cable they are more likely to buy your higher margin products like data and telephone.

The ability to produce local programming has gotten much easier in recent years due to the cost of cameras dropping significantly. I remember in the not-too-distant past helping local service providers get grants to buy video cameras for local organizations that cost more than $15,000 each. Today, studio quality cameras are handheld and cost a fraction of that old cost.

One of the first hurdles you must cross with local programming is figuring out how to get the content listed in the channel guide with everything else. Many, but not all channel guides allow you to insert your own custom programs.

A number of cable systems carry local programming of some sort, so let me talk about how various companies have gotten local programming onto their cable systems.

Create a Local Network. There is always the expensive way to do things, which is to create a traditional local channel on your cable system. This means you would have some sort of studio and you would produce a lot of content to run 24/7. Some companies have done this and think it is successful. Some of the larger cable companies such as Cox have local channels, but there are also smaller companies doing this like Hiawatha Broadband in Winona, Minnesota and several large telephone cooperatives in the West. But the cost of producing content is expensive and very few companies feel they can afford this option. To be successful, it must be done well.

Let Others Create the Content. There is a less expensive option which is to let other create the content for you. There are a number of systems that have given a channel to local government, to local churches or to universities. Sometimes these organizations to a great job and sometimes they don’t. Most viewers don’t hold local programming to the same standards as network TV, but shows must have good sound and decent video if they are to attract viewers. One of the most successful local programs I have ever seen was a company that carried a local court and it seems the DUIs get good ratings. Many communities have done well broadcasting local high school sports.

Video-on-demand. Another way to carry local programming is not to create a channel, but instead to create a library of local content. If your system is capable of video on demand then you can create a library of local content. This way you can not only cover little league or high school sports, but a subscriber can pull up the game where their son hit a home run from last summer to show grandma when she visits.

There are other uses of having this kind of VOD library. For instance, you can create a rotating set of content from the library to show in hotels to tell visitors about area attractions. You could do something like the City of Seattle has done and create an index of past government meetings so that somebody can pull up a specific meeting where a specific topic was discussed. You can also pull the best of the VOD content and create a channel where the content plays continuously. But to do this well you need to always refresh the content.

Web TV channels. Finally there is the newest way to create a channel. There are now some vendors who have made it easy to let you put any web content directly onto your cable system. They let you take any web programming and create a virtual channel. They let you create as many local channels as you like and to put the content into a channel lineup.

This really opens up the world of local content for a service provider. It takes a lot of electronics and eats up system bandwidth to create multiple traditional local channels. But using a web-to-TV interface you can carry almost unlimited channels in one channel slot on your network. Each customer can then just watch what they want out of the lineup because they are getting the content from the web and not broadcast as a ‘channel’ from the hub.

This means that you can give a ‘channel’ to every organization in town that wants one, be that high schools, colleges, churches, governments, non-profits, local businesses, etc. Some of them will do a good job at creating local content and others will not, but the best of them ought to create a great local line-up that your competition won’t have.

This technology also lets you bring in any other content from the web. You can add OTT content like NetFlix and Amazon Prime. You can make channels out of YouTube. Or you can add one of the web services that have already tied this kind of web programming together nicely.

So you can create channels that bring together local content plus the best of the web. One idea that I have mentioned before is to create a package of local programming, OTT web programming and network channels. Such a package could sell for $20 and be more profitable than your larger cable packages. You can also insert local advertising into local programming or sign up with somebody like aioTV who will insert national advertising and share the revenue with you.

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Current News Technology

Who Owns the Future?

Jaron Lanier (Photo credit: Thomas Hawk)

I just finished reading Who Owns the Future by Jaron Lanier and it was a really interesting read. He is a pioneer computer scientist and was involved in starting virtual reality. He is listed by Encyclopedia Britannica on a list of the 300 most important inventors.

It’s not the easiest book to read because it bounces from idea to idea, but some of those ideas are intriguing and thought-provoking. Let me hit on a few of them to give you a flavor of the book:

  • He says we have reached a point where technology is devastating the middle class. Industry after industry is folding and not being replaced. Historically, every new technology killed old industries but replaced them with new ones. But that is no longer the case. He points to Kodak which once had 140,000 employees, and it folded and was replaced by Instagram which had 13 employees when Facebook bought them. This has happened in other industries like music stores getting replaced by iTunes, video stores replaced by NetFlix, etc. And he thinks a lot more of this is on the horizon with the growth of 3D printing, self-driving cars, robotic mining equipment, robotic nurses and all the other technology that is being designed to remove the costly human element from the production process.
  • He says that wealth is now being concentrated by those who have the fastest computers. He gives this the name of ‘siren servers’ and he is talking about Google, Facebook, Amazon and all of the other companies that are creating wealth from gathering data about all of us in huge data centers. He argues that we are going to have to find a way to rebalance the information economy because these huge siren servers are using our information for free. He thinks that somehow we need to get paid for the data about us. I reviewed another book here last month by Eric Schmidt, the Executive Chairman of Google who made the same point but who thought that it was more likely there would be a future revolt by people who didn’t like what was being done with their data. But Lanier thinks it’s more likely that the siren servers will win and will know everything about us.
  • Lanier doesn’t think the problems being created are with the Internet, but rather with how the Internet has become organized. Major Internet companies like Google and Facebook tend to form monopolies on a global scale. These businesses succeed by offering something for free – such as the Google search engine, the Facebook social connections, the Linked-In business connections, etc. And for the use of these free services the public gives up tremendous amounts of information about themselves. And it is these huge databases of personal information that is creating the huge book values for these companies.
  • He also doesn’t have a very good opinion of the people running these huge siren server companies. He says that the technologists who are running the siren server companies are narcissists who are blind to the effects they are having on the world. He says that geeks are not really egalitarians despite the t-shirts and flip-flops, and that the technology world is one of pure Darwinism where only the very most successful are able to survive to the point of making money from their technology. He is not comfortable that these are the people who are running the world.

This is the kind of book I really like because it made me think hard. Lanier is looking at the tech world from the perspective of the ultimate insider and is seeing things that I have felt but never was able to put into words before. I personally have always been very leery about how the information gathered on all of us will be used in the future. I read recently that there is an average of 12.5 different places on the Internet that has gathered personal data on each person who uses the Internet. I am growing more leery of accepting the equation of using a site for free and paying for the privilege with information about what I like, who I know, what I am interested in. Lanier says that we are going to lose the battle with the siren servers unless we can find some way to balance the relationship between us and the big companies. I hope we find a way to do that, because I don’t want to live in a Big Brother world.

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The Industry What Customers Want

Should You Carry OTT Programming?

Every cable provider today needs to consider carrying Over-the-Top (OTT) channels on their cable system. OTT programming is content that is available on the web and includes such things as Hulu and Netflix. There are a number of reasons to consider this:

  • I have discussed the phenomenon of cord-cutters in other blog posts. The large organizations that track cable customers report that a lot of customers are dropping traditional cable. Nielson reported that at least one million people dropped traditional cable last year and that number is expected to increase. The cable industry appears to be at the same place that the telephone industry was ten years ago and everybody expects more and more people to drop cable TV every year much as has happened to land line telephones. To the extent that you can give customers easy access to OTT programming on your cable system you may convince some of them not to leave your system.
  • There are a lot of customers buying OTT boxes, which are devices that let them watch OTT programming on their TVs and also on other devices using WiFi such as pads and smartphones. These are devices like Apple TV, Roku, Boxee and Playstation.  Once a customer has an alternative box in their home sitting next to your settop box they have mentally started the process of dropping you. If you can give customers easy access to the OTT programming they want you will have lowered their incentive to buy an alternate box.
  • You can use OTT programming to develop new products. Nobody makes much money today with cable TV. You can create a new bundle of programming by combining OTT, the basic network channels and local programming that can be more profitable than the large packages you sell of many channels. I will discuss this more below.

There are a number of ways to get OTT programming onto your cable system. You can gather the OTT program sources yourself and put them onto open channels on your system. There are devices available that will let you create a channel out of web content. For instance, you can create a channel that would have buttons for the most popular web content.

But an easier way is to use somebody who has already done that aggregation. There are several vendors who have packaged OTT channels together to make a ‘channel line-up’. Probably the best of these right now is a company called AIOTV (All-in-One TV). This is available on the web to anybody, but they also have a version of their programming that is designed to be used as a web channel.

AIOTV will supply the feed to you for free to get onto your cable system. They sell nationwide advertising and they insert ads at the beginning of each show that a customer watches. If you put them onto your cable system they will send you a small revenue sharing check each month for carrying their ads. It’s not a lot, and the revenue is not the primary reason to do this, but it’s still nice to get a check.

The other nice feature of AIOTV is that their platform gives you an easy way to create additional web channels of your own. There innumerable ways for you to use this capability and you could add additional web content to your line-up that is not already on AIOTV. However, the best use of this capability is to use it to create local programming. You can use AIOTV or other platforms to create a channel for every school, church, non-profit or other entity in your area. The programming would be up to the entities who have channels and they can use it to put items of interest to your community onto your cable system. For example, this is the easiest and lowest cost way to get things like little league games and high-school sports onto your network.

With AIOTV or some similar provider you can create some sense out of local programming. The platform gives you a way to create a traditional looking channel line-up so that people can find the local channels they want. Each local channel supplier also has the ability to operate their channel so that it is continuous feed or on-demand.

Local programming is a way to get and keep customers on your cable network. Other communities that broadcast a lot of local content say that this becomes one of the more popular things on their network. People want to watch local sports and graduation ceremonies and other local events. Most cable systems today carry local city-council meetings, but there is a lot more events of local interest in every community.

Finally, you can use OTT and local programming to create a new product. For example, every cable provider has a basic product that consists of the broadcast networks such as ABC and NBC along with a few other channels. You can create a pretty robust package that includes your basic line-up, OTT programming and local programming. Priced at something like $20 per month this would be the most profitable product on your cable system. Today most companies are lucky if they break even with the larger cable packages after paying for all of the programming.

This kind of line-up offers customers a ton of programming including web access to many of the most popular shows they watched on traditional cable. I have anecdotally spoken to several people who have dropped traditional cable for a Roku or Apple TV box and they say that they don’t feel like they have suffered any big drop-off in options. If you can add live network TV and local programming to this mix you have a robust line-up that many of your customers are going to see as an attractive alternative.

I think that cable systems are on the verge of pricing a lot of customers out of being able to afford their services. Expanded basic packages are now $60 to $70 per month in most markets and continue to increase in price every year. So consider a preemptive strike and give your customers a pre-packaged lower cost alternative rather than waiting on them to go find this on their own.

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Current News Technology

My Take on the Internet of Things

I think there might be as many different predictions about the Internet of Things as there are bloggers and pundits. So I thought I would join the fray and give my take as well. The Internet of Things is that it is going to involve a new set of technologies that will enable us to get feedback from our local environment. That is going to allow for the introduction of a new set of tools and toys, some frivolous and some revolutionary.

I have read scores of articles talking about how this is going to change daily life for households. The day may come when our households resemble the Jetsons and where we have robots with more common sense than most of us running our households, but we are many years away from that.

There will be lots of new toys and gadgets that will sometimes make our daily lives easier. For instance food we buy may have little sensors put into packaging that will tell you when your produce is getting ready to go bad so that you won’t forget to eat it. There will be better robots that can vacuum the floors and maybe even do laundry and walk the dog. But I don’t see these as revolutionary and probably not affordable for the general populace for some time. For a long time the Internet of Things is going to create toys that wealthy people or tech geeks will play with, and it will take years to get these technologies to make it into everybody’s homes. Very little of what I have been reading for household use sounds revolutionary.

The biggest revolutionary change that will directly affect the average person is medical monitoring. Within a decade or two it will be routine to have sensors always tracking your vitals so that they will know there is something wrong with you before you do. There will be little sensors in your bloodstream looking for things like cancer cells, which is going to mean that we won’t have to worry about curing cancer, we’ll head it off before it gets started. This will revolutionize healthcare to be proactive and preventative and will eventually be affordable to all.

English: A technology roadmap of the Internet of Things. (Photo credit: Wikipedia)

I think the most immediate big benefactor of the Internet of Things is going to be at the industrial level. For instance, it is not hard to envision soil sensors that will tell the farmer the conditions of each part of his fields so that his smart tractor can fertilize or weed each section only as appropriate. There is already work going on to produce mini-sensors that can be sent underground into oil fields to give oil geologists the most accurate picture they have ever had of the underground topology. This will make it possible to extract a lot more oil and to do so more efficiently.

Small sensors will also make it a lot easier to manufacturer complex objects or complicated molecules. This could lead to the production of new polymers and materials that will be cheaper stronger and biodegradable. It will mean that medicines can be modified to interact with your specific DNA to avoid side effects. It means 3D printing that will feel like Star Trek replicators that will be able to combine complex molecules to make food and other objects. NASA has already undertaken a project to be able to print pizza as the first step towards being able to print food in space to enable long flights to Mars.

And a lot of what the Internet of Things might mean is a bit scary. Some high-end department stores already track customers with active cell phones to see exactly how they shop. But this is going to get far more personal and with face recognition software stores are going to know everything about how you shop. They will not just know what you buy, but what you looked at and thought about buying. And they will offer you instant on-site specials to get you to buy – ads that are aimed just at you, right where you are standing.

I remember reading a science fiction book once where the ads on the street changed for each person who walked by, and we are not that far away from that reality. There are already billboards in Japan that look at the demographics in front of them and which change the ads appropriately. Add facial recognition into that equation and they will move beyond showing ads aimed at middle-aged men and instead show an ad aimed directly at you. The Internet of Things is going to create a whole new set of attacks on privacy and as a society we will need to develop strategies and policies to protect ourselves against the onslaught of billions of sensors.

Probably one of the biggest uses of new sensors will be in energy management. And this will be done on the demand end rather than the supply end. Today we all have devices that use electricity continuously even when we aren’t using them. It may not seem like a lot of power to have lights on in an empty room or to have the water warm all of the time in an automatic coffee pot, but multiply these energy uses by millions and billions and it adds up to a lot of wasted power. You read today about the smart grid, which is an effort to be more efficient with electricity mostly on the demand side. But the real efficiencies will be gained when the devices in our life can act independently to minimize power usage.

Sensor technologies will be the heart of the Internet of Things and will be able to work on tasks that nobody wants to do. For instance, small nanobots that can metabolize or bind oil could be dispatched to an oil spill to quickly minimize environmental damage. The thousands of toxic waste dumps we have created on the planet can be restored by nanobots. Harvard has been working on developing a robot bee and it is not hard to envision little flying robots that could be monitoring and protecting endangered species in the wild. We will eventually use these technologies to eat the excess carbon dioxide in our atmosphere and to terraform Mars with an oxygen atmosphere and water.

Many of the technologies involved will be revolutionary and they will spark new debates in areas like privacy and data security. Mistakes will be made and there will be horror stories of little sensors gone awry. Some of the security monitoring will be put to bad uses by repressive regimes. But the positive things that can come out of the Internet of Things make me very excited about the next few decades.

Of course there will be a lot of bandwidth needed. The amount of raw data we will be gathering will be swamp current bandwidth needs. We are going to need bandwidth everywhere from the City to the factory to the farm, and areas without bandwidth are going to be locked out of a lot more than just not being able to stream NetFlix. The kind of bandwidth we are going to need is going to require fiber and we need to keep pushing fiber out to where people play and work.

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The Industry

Will There Be a Tipping Point in the Cable Industry?

The Tipping Point: How Little Things Can Make a Big Difference (Photo credit: Wikipedia)

This is not a book review, but a few years ago I read a book called The Tipping Point: How Little Things Can Make a Big Difference by Malcom Gladwell. This booked looked at examples of tipping points – when minor events reach a level which triggers a more significant change. In the book he looked at a number of popular culture events such as how Hush Puppy shoes went from being something worn by New York hipsters to being in every mall in America in a short period of time. It was a thought-provoking book that looked in particular at how certain types of people are able to effect much bigger changes in the world than ought to be expected.

What made me think back on this book is that I have been thinking a lot lately about the cable TV industry. There are a ton of those ‘minor’ events happening in the industry and I have talked about some of them in my blog before. And I have been thinking about whether these small trends can accumulate together to fundamentally change the industry or if it will just change more slowly over time. I’ve been trying to think about what it might take for the whole industry to reach a tipping point.

We have a parallel to what might happen with cable TV service by looking back at what happened to home telephone service. Fifteen years ago about 98% of households had a traditional home telephone. But then Vonage and other VoIP carriers came along a little over a decade ago and whittled into the home phone market. But the VoIP carriers collectively did not do that great and after a couple of years in the business had captured only about 3% of the total market. But then other factors began hitting the industry. For instance, companies like Skype arose allowing people to make calls over the Internet without even using a phone. But the number one factor that has killed many home telephones has been the meteoric rise of cell phones. In looking back I think the landline phone industry really started losing lines when the cellular industry introduced family plans and all of the members of a family could have a cell phone.

In a study done in the first half of 2012, the Center for Disease Control asked many questions including ones about telephone usage. They found that the number of households with landline phones has dropped below 65%. In looking at the statistics in that study I conclude that the landline telephone industry never reached a tipping point. The industry certainly declined over a fairly long period of time and will almost certainly continue to do so. But there has been no tipping point such as was seen in the music store business which went mostly bust within just a few years after iTunes got popular. And so I ask myself if there will be a tipping point with the cable TV industry or if it will instead go into a long steady decline like the landline telephone business?

There are a number of factors that are affecting the cable TV industry, and most of them are relatively new. Some of these include:

  • Over-the-top video where programming is available on the web instead of by a traditional cable TV subscription.
  • Cord-cutting. Neilson has estimated that there are now 5 million homes in the US that don’t watch any form of TV and that this number grew by 1 million last year.
  • Cord-nevers. These are young households who get their entertainment from cell phones, pads and other methods and who do not sign-up for traditional cable TV packages when they start a new household.
  • Rate fatigue. The ever climbing cable bills that are pricing cable service out of the range of many households. This leads some customers to leave cable but others to downgrade to smaller packages.
  • Ever increasing programming costs. To a significant degree the cable TV rate increases are being driving by the programmers who charge more each year to cable operators for carrying their content.
  • Tons of companies competing for cable’s customers like NetFlix, Hulu, Amazon Prime and many others. And to some degrees the broadcast networks are helping them by making programming available on the web soon after it is aired live.
  • Companies like Aereo making it easier for customers to watch TV on any device.
  • Really simple devices like Roku, Apple TV, Playstation and many others making it easier for the non-technical household to get alternate programming onto the TV.
  • Unique programming being created just for the web. NetFlix and others are now developing programming directly for the web. There is also a movement to pick up popular shows that get cancelled and to continue them on the web.

There are a few experts that believe that the cable industry will be able to hold its own, even with all of these trends going on. But there are a lot more experts who are positive that the industry will decline, but the predictions of how fast vary from a slow decline like telephone service up to predictions of a fiery crash like what happened to CD stores due to iTunes. And there is ample evidence that the decline has begun. I saw a statistic that said that in 2012 the cable industry as a whole added a net of 50,000 new customers, wherein past years that would have been millions. And there is evidence that every one of the above trends is hurting the industry.

And there is more disruption to come. Wireless connections have gotten faster making it easier to watch TV while on the go. John McCain just introduced a bill that would promote (but not guarantee) a la carte programming. Comcast just increased their cable modem speeds nationwide. It just becomes easier and easier for a household to elect something other than the traditional cable TV packages.

Like many I certainly foresee an industry that is going to lose customers at a faster and faster pace over time. But I just don’t know if all of these little factors can somehow produce a tipping point for the whole industry. With that said, I believe that the effect of these changes will differ by market and I expect that there will be companies and markets that reach a tipping point long before the whole industry does.

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