In 2008, US cable subscribers had 129 channels to choose from, and they watched an average of 17 channels in a given week. Five years later, they had 189 channels, and were still watching only 17 channels. With cable bills at ~$125 per month, simple math says customers were paying ~$7 per month per channel viewed. And then came the alternative offerings from Roku, Netflix, Hulu and more recently Amazon, HBO Now, Sling etc. Soon, the customers’ bills fell to an average of $7 per month for a whole slew of channels.
But, cable operators were not going to give up easily. They started to discount “triple-play” packages that combine broadband, television and telephone service, and began to rely on sports enthusiasts and older Americans. Older viewers watch more television than any other group and sports viewers wanted to watch live football, baseball and basketball games. For a while the losses to Netflix, Amazon etc. were modest, at just over half a million households in total in 2013 and 2014, out of 101m subscribers. In 2015, however, traditional pay TV lost 1.1m subscribers and then last year, the number grew to 2m. Small cable channels started to disappear as advertisers moved elsewhere. Reruns were no longer cash cows. Viacom and NBC Universal began cutting down channel offerings.
Even as cable and satellite operators scramble to figure ways to stem the outflow of customers, Amazon announced this week that it has signed a one-year, $50 million deal to stream Thursday night NFL games for free to Amazon’s 60 million prime members. One would be correct in projecting that the live NBA and MLB games will follow and customers will soon be ready to make the final call to their local cable and satellite provider.
Future Wealth’s View
In our report on the topic of Cord Cutting published in Oct 2016 (link to the article – https://futurewealthllc.com/
TV advertising itself could see a transformation as Amazon could use the football games to experiment with presenting different ads to different consumers at the same time. This could enable advertisers to sell ads during NFL or NBA games designed to prompt viewers to take actions during the game using Amazon’s home assistant Alexa or Google’s Assistant, such as ordering a pizza or a bag of Dorritos.
Those that do cut the cord almost never come back, joining the ranks of millennials who avoid signing up for cable in the first place. No need to feel sorry for the cable and satellite guys. They have milked this cow long enough and consumers are moving to a low fat diet.