Pay TV weakness beginning to be felt by major media - Catholic Courier

Pay TV weakness beginning to be felt by major media

WASHINGTON (CNS) — The cable television world is shrinking. Not by a lot, but it’s shrinking.
 
The minor signs of shrinkage were felt by the behemoth TV companies even before the Wall Street swoon in August.
 
The Walt Disney Co.’s stock went down 9 percent by early August, not long after it confirmed that there were subscriber losses at ESPN, its flagship cable cash cow.
 
And from one company, the shrinking stock price malady touched other big media firms as if there had been a contagious disease spreading.
 
Time Warner’s stock went down 8 percent. Viacom and 21st Century Fox slid 7 percent. Also victimized by skidding stock prices were CBS, Comcast and Discovery Communications.
 
In all, it resulted in a net loss of $50 billion for the TV industry. Note that this downturn included traditional broadcast networks, cable firms, and companies that own both.
 
This column has said before that the TV industry will pay attention only when the market speaks to them. The ratings slide was, by itself, apparently not enough. But when stockholders squawk, the companies take notice.
 
There’s no indication that these companies are going to adopt a different, more family-friendly business model based on these Wall Street jitters, at least not yet. That’s too bad. Consider: How many people gather around the smartphone, or the tablet, or even the desktop, to “watch TV”? But how many people can gather around the ever-bigger screens in the American home? There’s a reason it’s called “broadcasting.”
 
If any of this sounds familiar, it’s because the same thing happened to the newspaper industry. Newspaper subscriber numbers were getting soft but the value remained high. Hoping to cash in while the getting was good, a majority of the board at Knight Ridder, the second-largest U.S. chain, declared its intent to sell the company to the highest bidder lock, stock and barrel.
 
Except that there was no lock, stock or barrel. Not only was there not a highest bidder, there was no bidder at all. Knight Ridder had to sell the company in pieces, and some of the buyers turned around and sold some of their new holdings to other newspaper chains. The total valuation of the newspaper industry took a figurative blow to the solar plexus, and several newspaper chains had to declare bankruptcy to clean up their balance sheet.
 
The decline in circulation did not mean that people stopped wanting to read news. It signaled that readers wanted to get their news from other sources.
 
The story is just a repeat with the, uh, record industry. Sales of CDs have be on the decline for the past dozen years. Record labels keep looking for new ways to make money from their content. But while people enjoy music as much as ever, they’re far more attuned to buying one song at a time than ever before.
 
Consider TV. Based on studies of how much “screen time” households consume each day, it’s not that people are tired of watching TV. It does mean, though, that they’re dissatisfied with the choices available to them, even in the 500-channel universe, and are more willing to try different — and probably less expensive — forms of TV watching. Cue Netflix, Hulu and their brethren.
 
The MoffettNathanson media research film tells the story this way: “A year ago, the pay TV sector was shrinking at an annual rate of 0.1 percent. A year later, the rate at which the pay TV sector is declining has quickened to 0.7 percent year-over-year. That may not seem like a mass exodus, but it is a big change in a short period of time. And the rate of decline is still accelerating.”
 
The Disney example is a fine illustration. Disney’s earnings were up thanks to movies like “Inside Out” and flicks based on Marvel comic book characters. But the stock price tumbled just because of ESPN.
 
And that’s where consumer choice comes in. If you want a premium channel like HBO or Showtime, you’ve got to pay a monthly fee for it. This means pay-cable channels had better put interesting programming on their schedule to justify continued subscriptions.
 
ESPN and all the other so-called free channels are not really free, but they charge a cable company for the right to include it on its system. That charge is built into the price a cable franchise charges a household. 
 
What has made ESPN bulletproof for decades was its cluster of channels. It could get away with holding up franchises without a gun: “If you want one channel, you have to take them all.” Some franchises have reported having to pay for eight ESPN channels, even those that don’t carry the ESPN brand.
 
It’s the hidden costs built into the so-called basic cable package that’s gotten viewers looking for alternatives. Franchises, too. The a la carte option sniffed at for years by the cable industry may not sound so bad now.
 
– – –
 
Pattison is media editor for Catholic News Service.
 
 

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