(This is a guest post by Alexis Caffrey (@AlexisCaffrey), a freelance writer with a focus on technology, new media, and design. You can find more of her work at AlexisCaffrey.com).
The cable TV industry may be looking at a big change in the future, according to Cablevision’s CEO Jim Dolan. In an interview with the Wall Street Journal, Dolan stated “there could come a day’ when his company stops offering television service, making broadband its primary offering.”
This isn’t the first time the cable-TV industry has had to evolve to remain profitable. Companies like Comcast and Time Warner first started out offering TV packages, and then found that they could increase their revenue stream by adding Internet and home phone service.
Keeping up with the competition:
Now, with the constant demands for faster Internet speeds, cable companies have had to move beyond their traditional infrastructure of coaxial copper cables to include fiber optics in their networks. Although it wasn’t first in the game, Google Fiber raised the bar for Internet service providers when it introduced 1 GB speeds in Austin, Kansas City and Provo, Utah. Even though Google’s fiber footprint is very limited, other Internet service providers, such as Verizon FiOS, offer fiber-optic networks with competitive speeds that reach up to 500 Mbps and have a much larger reach.
In order to keep up with the increase in faster Internet speeds, digital TV and phone, cable companies began adding fiber optics to their copper networks to increase bandwidth capabilities. However, cable Internet still isn’t able to reach the speeds of networks that are powered by pure fiber optics.
More channels, fewer subscribers:
Besides competition from Google, Verizon and AT&T, cable companies are also losing customers who subscribe to Netflix or Hulu, as well as those who stream TV on devices like the Roku Apple TV, or Google Chromecast. Instead of paying a hefty price for hundreds of channels they don’t watch, more consumers are choosing to limit their scope and choose a service that gives them a la carte channel options.
Even Cablevision’s Dolan recognizes the shift in viewership, admitting in an interview with Business Insider that his children prefer streaming TV on services like Netflix rather than “the packaged channels that cable providers offer today.” He also “thinks that the current cable-TV industry is in a ‘bubble’ that will burst when the youth of today become the mainstream consumers of tomorrow. With the massive infrastructures needed, it may not even be worth it for cable companies to offer TV after the bubble bursts.”
His competitors are already seeing signs of the public’s move to online viewing rather than TV subscriptions. When Comcast released its Q2 financial report, the company had 187,000 new broadband customers, while losing 159,000 video customers.
Public lash out over blackouts:
Disputes between cable companies and content providers aren’t a new issue. However, with a multitude of options available to consumers to watch the shows they enjoy, blackouts may be enough reason for people to leave their current TV provider.
Time Warner Cable is one example of a company that posted huge losses in the third quarter of 2013, due to its conflict with CBS over retransmission fees. From July to September, Time Warner lost 306,000 TV subscribers.
Where does cable TV go from here?
With cable heavyweights such as Time Warner and Comcast posting major losses in the TV subscription sector, the industry will eventually have to re-evaluate how they offer content to customers. The industry faces an issue similar to the music industry when it was forced to adapt to single-track purchases on iTunes and free streaming radio stations.
In the near future, we may see cable companies shift their focus more on the sales opportunities in streaming content, rather than offering high-channel-count bundles that yield a smaller viewership.