Reports of cable TV’s death have been grossly exaggerated.
Everyone knows that traditional cable TV is dead or at least on life support and speedy Internet access and online content will soon rule the day. Residents will slowly but surely retire their cable TV subscriptions—just as they did with their newspaper subscriptions—and opt for over-the-top video (also known as Over-the-Internet video). Phone and cable companies will have nothing left to sell but big high-speed Internet pipes to feed an unquenchable appetite for online media.
However, there are a few critical flaws in this scenario. First, cable TV video consumption continues to increase. Second, cable TV, like high-speed Internet access, is evolving. (Despite their intrinsic differences, we lump all subscription video services provided by cable companies, phone companies and direct broadcast satellite providers into a single category for this series of articles.) Third, quality online content is becoming expensive.
Clearly, there is tremendous growth in the quantity and quality of, and the demand for, online content. There is no doubt that Internet protocol (IP) communications and content are invading every aspect of consumers’ lives. As Tamar Lewin recently wrote in The New York Times, “If your kids are awake, they’re probably online.”
However, time spent viewing television continues to increase, and relatively little online time is spent viewing traditional linear television programming. According to the media research company Nielsen’s most recent Three Screen Report, Americans watch a disturbing 35 hours of television each week, while using online video mainly to catch up on shows that they missed.
“It seems that, for the foreseeable future at least, America’s love affair with the TV will continue unabashed,” says Nielsen Company’s Media Product Leader Matt O’Grady. “We seem to have an almost insatiable appetite for media, with online and mobile programming only adding to it.” At this stage of its evolution, online programming could be considered an augmentation of linear programming rather than a replacement for it.
Admittedly, the supremacy of network television and traditional linear television programming is waning. Expanded basic programming is disappearing from most providers’ lineups. However, the proliferation of high-definition channels, digital video recorders and video on demand (VoD) is transforming cable TV. Comcast recently announced it will soon boast more than 11,000 VoD titles in some markets. The release of more day-and-date titles (movies available simultaneously with DVD or even theatrical release) will further drive demand for VoD.
Cable’s Growing Offerings
Advanced set-top boxes and the gradual move to IP will only increase cable TV’s array of services and its flexibility. AT&T’s all-IP U-verse video service is beginning to demonstrate the long-awaited promise of IP television. Other video providers, including Verizon and numerous cable companies, already use IP for such video services as VoD. Verizon has openly discussed moving toward complete IP delivery, and rumors about similar plans by cable companies abound.
Though online video content has grown exponentially in amount and quality over the past few years, free commercial programming online is increasingly embedded with commercial breaks and offers no ability to fast-forward though them. Moreover, the days of free commercial programming and other quality content appear to be numbered because Web advertising generates less revenue than cable TV advertising.
CBS’ CEO Les Moonves recently said he was spurning the online video service Hulu because “I’m only getting pennies online compared to the dollars I’m getting at the networks.” Thus, many believe that Hulu and similar sites will soon begin to charge for the majority of their content. Once that occurs, the value proposition for consumers will change dramatically as these sites effectively become premium over-the-top video services. Just compare the cost of replicating your favorite television programming for a month from iTunes with your average cable TV bill.
High-speed Internet access and online content will continue to grow in ways few can imagine. However, contrary to popular belief, that growth does not necessarily devalue cable TV. For the foreseeable future, we will likely see both services flourish and evolve. Eventually, they will converge – and when they do, we doubt you will be able to tell the difference between the two.
Apartment owners should remember that neither video nor high-speed Internet access is static. Like everything else, an owner most work constantly to ensure that a community’s services, infrastructure and contracts keep up as the world changes.
Henry Pye is Vice President of Velocity Advisory Services for RealPage. He can be reached at henry.pye@realpage.com.
Chris Acker is Director, Building Technology Services Group at Forest City Enterprises Inc. He can be reached at chrisacker@forestcity.net.