Viewers Hitting ‘Off’ Button on Pay TV15 Aug, 2012 By: Doug McPherson
NEW YORK – Why do we need to pay cable and satellite companies when we’re watching YouTube and Netflix movies? Evidently that’s the question many TV viewers are asking themselves. And they’re answering in a loud and unified voice, “We don’t.” Then they follow up with phone calls to their pay-TV providers to cancel their service.
The result? In second-quarter 2012, the pay-TV industry got about 400,000 more calls from subscribers dropping their patronage than those who signed up.
TV executives even admit folks are moving to cheaper options. DISH Network Chairman Charlie Ergen told the Wall Street Journal even his own kids’ viewing habits are proof of the exodus.
But it’s not stopping leaders in the TV industry from exploring alternative revenue streams. Time Warner Cable Inc. Chief Executive Glenn Britt and Comcast Corp. Chief Executive Brian Roberts are looking to an unlikely source for inspiration. The two men told the Journal last week they see Google Inc.’s nascent one-gigabyte communications network in Kansas City as a “laboratory” for encouraging new Internet services that will drive the adoption of faster broadband tiers – ultimately benefiting their own businesses too.
The Journal also reports the cancellations have influenced negotiations between pay-TV operators and channel owners over fees, such as the recent blowup between DirecTV and Viacom Inc., as operators warn that demands for higher fees could fuel more losses.
But industry insiders say the second-quarter numbers aren’t as bad as they first appear, and add that it’s a typically weak quarter because it’s when college students disconnect their service for the summer. In 2010 and 2011, numbers show pay-TV compensated for declines in other quarters. The Journal reports that in both years, the industry posted net growth of about 200,000 subscribers.
Still, it’s clear low-cost options for free or inexpensive online video are on the uptick. Two examples: Amazon.com’s Prime service and Netflix have old TV episodes, not to mention Hulu and Apple’s stranglehold on current TV programming for a price. Plus, Google and YouTube have invested in building original content with celebrities.