Will The Creative Destruction Of The Free Market Kill Cable?
About a year ago my wife and I decided to cancel our cable television subscription. There were only a few shows on television we cared to watch, and we couldn’t justify paying so much money for so many channels that we just weren’t watching. So replaced our cable television with a couple Roku boxes that allow us to watch the movies and shows we want on services like Netflix, Hulu, Amazon Instant Video and MLB.tv.
The cost we pay to these services for streaming and a la carte show purchases monthly is about $40 less than we were paying for our cable (though we did keep Midcontinent’s most excellent cable internet service). That we can use these services on other platforms such as our phones, computers and tablets is just icing on the cake.
Are my wife and I on the cutting edge of a new trend in how people get their television content? I haven’t been so sure. It’s not for everybody. A lot of people like to watch their favorite shows live, rather than the next day or later. And some people watch so much television that buying their favorite shows a la carte wouldn’t be cost effective. But as time goes on, and technology/services improve, cutting the cable is getting easier and cheaper. So much so that it may, finally, be having an impact on the cable television market:
The most intense debate in television today—whether the lure of Netflix and YouTube is causing viewers to disconnect their cable-TV service—is likely to intensify after new figures showed a slight decline in overall pay-TV subscribers in the second quarter.
Publicly traded cable, satellite and phone companies had a combined net loss of about 200,000 subscribers in the quarter, earnings reports showed, about 0.2% of the roughly 100 million pay-TV subscribers. Sanford C. Bernstein estimates the overall industry shed more than 400,000 subscribers during the period when results for closely held operators are included.
A sustained decline in the number of people subscribing to pay TV has ramifications for pay-TV operators and for TV channels, most of which share in the fees paid by subscribers. Big entertainment companies generate much of their profits from subscription fees paid to TV channels.
This is a fascinating evolution in the entertainment market, and perhaps the most fascinating aspect is that the traditional cable/satellite television package probably isn’t going to be replaced by any monolithic solution. A Roku, or similar products from companies like Google and Apple, might be the solution for some. Or maybe some people will ditch the televisions and rely more on tablets and computers.
Who knows, but it’s exciting to watch. Consumer demand for cheaper, more accessible entertainment is driving innovation and invention in the market. That may be killing cable – time will tell – but if it does it will be replaced by something better. This is how the free market works, and it could work the same way in other areas such as health care and energy if we let it.Tags: amazon instant video, Entertainment, free markets, netflix, roku