In the world of television, consumer habits are changing rapidly, and it’s unsettling the business community. “Cutting the cord” or when people decide to go entirely digital and cancel their cable or satellite is becoming an everyday occurrence. As a result, companies are scrambling to figure out how to survive in the face of an evolving media landscape.
Mass cord-cutting is costing the cable companies dearly. Nielsen reported in 2013 that 5 million U.S. households had cut the cord and switched to other devices. Consumer Reports said that 658,000 subscribers dropped their cable providers in the second quarter of last year. On average, cable providers are losing a total of two percent of their subscribers per year. This translates in billions of dollars in lost revenue.
Undoubtedly, there will always be a niche of live TV in some form, but an increasing number of people are consuming their media digitally. The sudden rise of Netflix as a major force in the industry underlines how quickly our habits are shifting to an on-demand world. Much to the dismay of established studios and industry giants in television, Netflix has made a name for itself with some amazing content. The streaming service continues to be on a shopping spree for movies and series that will guarantee its subscriber base continues to grow globally.
The rise of Netflix and other streaming services such as Hulu and Amazon Prime Video is ultimately what’s hurting established companies’ bottom line. Subscriber-based channel ESPN, which charges the highest rates to carriers, has seen its customer base hit a peak and is now declining rapidly. Once a profit bonanza for its parent company Disney, ESPN is now pulling in a billion dollars less annually than just a few years ago. Disney’s other cable channels like ABC Family, Disney Channel, Lifetime, A&E, and the History Channel have also been hemorrhaging millions of customers in the past few years. Many analysts say there’s little companies like Disney can do to stem the tide.
Additionally, on-demand culture is also proving to be very disruptive to the old-fashioned way of doing business in the TV world. Commercials have always been the major driver of revenue that financed content. In an era when people are increasingly watching TV on their DVRs and cutting the cord completely to stream online, how can advertisers adapt to the change?
According to Business Insider, brands and marketers need to develop new strategies to tackle the changing landscape of TV. First they must understand how consumers are now watching TV. Strategies must change to accommodate new trends. because advertisers are losing out on the untapped market that’s popping up on popular streaming channels. Targeted advertising is the way of the future, much like what we currently see on websites such Facebook.
Advertisers may be dragging their heels right now because most Americans who watch TV on other platforms belong to lower-income groups. Because future growth will come from this burgeoning demographic of cord-cutters as the traditional television viewers age out, companies wishing to reach consumers risk being left behind by sticking to what they know instead of adapting to the new normal.
Time will tell how the industry will weather this storm. In the meantime, people will continue to cut the cord and business giants will face further profit slumps. The transformation of the way we consume media has already begun with the Web completely changing the text-based content industry. The video content industry is well on its way to complete disruption.
David is the Editor of Bold. He's especially passionate about millennial economic empowerment. A former local news reporter, David is originally from the Little Havana area in Miami, and later became a pioneer resident of the Disney-inspired town of Celebration, Florida. David holds a Master’s in Public Policy from the Harvard Kennedy School.
Mandy is the managing editor of Bold.global. She’s obsessed with TV and with that passion she created Primetime Addiction that she grew to reach 25,000+ people a month. Mandy holds a master’s degree in magazine journalism from England. She’s contributed to publications in New York, Florida and the United Kingdom.