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July 6, 2015

Cable TV: The Beginning Of The End?

Does the influx of streaming TV providers signify the end of cable TV?

Each year, as summer approaches a new wave of fresh college graduates start the adult portion of their bright lives. With this, the process of job searching, moving out of their parents houses, and learning the expenses that will now face them as adults in the job world. They will soon discover the same thing that most young millennials discover that life is expensive. They are faced with paying off loans, rent, food, and utilities. The question that presents itself is where they can save? Enter in: Cable TV.

A growing trend among Millennials is to abandon purchasing traditional cable in favor of cheaper alternatives. This new trend raises a few questions. The first being: Is this trend going to be just a fad or the new way to consume television? If this is a new way, how will this effect advertising and media buying moving forward?

Netflix has not only created a unique platform for television viewing but has now established itself as a provider of new shows. Premiere networks such as HBO and Showtime can be watched via their dedicated streaming services, while Netflix, Hulu Plus, and Amazon Instant TV members can watch network shows. In combination, Millennials can watch the majority of their shows without having to pay for the cost of an entire cable package.

Looking beyond the well-known options are the capabilities of the Amazon Firestick. The Firestick has the ability to download apps that enable streaming to movies and TV shows without a monthly cost. The legality of this torrent may hinder its ability to grow, but as technology continues to improve platforms similar to this could be the way of the future if cable costs to rise.

The question for marketers is now: If the options to view television without commercials continue grow and change, then how will it affect advertisers moving forward?

The first step may hinge on Netflix and their willingness to begin to sell ad space. “Netflix is sitting on a massive stash of consumer data that it can mine to help advertisers tailor their pitches. For years Netflix has been analyzing what people watch to suggest movies or TV shows and can apply that same formula for marketers.” Netflix has the ability to make this happen, however, they are held back as to not to agitate their loyal fan base. Amazon Prime and Hulu Plus will likely follow suit, however they do not have the popularity of original programs that Netflix has.

The first steps towards including advertising have already been taken by Amazon. “The e-commerce giant, which has started quietly experimenting with video ads, is adding more of them to its “Amazon Instant Video” store. Amazon is now offering a small selection of TV reruns  for free — to anyone who wants to watch them, not just its Prime subscribers — and inserting unskippable commercials into the shows.”

With ad space being sold, each company will continue to increase its revenue, which would enable them to create new shows, license more shows, and continue to improve its platform to levels we have not yet reached. In the event this does happen and they manage to keep subscription prices to a minimum, their subscription base will still continue to grow. At this point, we will likely see Millennials purchasing fewer cable packages.

With the decline in cable packages and increase in streaming subscriptions, which will happen first? Will cable make an adjustment to the price structure, or are we about to enter an age where the streaming television will be the standard and cable will be secondary?