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Bundled Cable Deathwatch: Ratings Plunge, Darwin Looms

Bundled Cable Deathwatch: Ratings Plunge, Darwin Looms

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According to a Variety report released this week on the plunge in the number cable television viewers,  millions of Americans are going through what I call The Process.

You don’t just cut your cable or satellite television cord all at once. There’s a process involved where your viewing habits slowly migrate away from cable and towards alternative outlets like Netflix and Amazon Streaming. Then “it” happens. You realize you’re paying $100 a month for a service you hardly watch (cable) and $10 a month for one you watch all the time (streaming).

You still don’t cut the cord.  Unfortunately, not everything you want to watch streams: News, sports, Jimmy Kimmel… This starts another process: Am I willing to pay $100 a month for ESPN and Fox News?

The number of people going through this process can be unscientifically gleaned through the ratings for cable television, which are currently in a double-digit freefall:

For this year’s third quarter, C3 ratings among adults 18-49 were down 8% across the board for the major groups — with steeper drops of 22% across the A+E Networks cablers (A&E, History, Lifetime); 14% across the NBCUniversal cable cluster; and 13% for both Disney’s cablers and those of Time Warner, notably TNT and TBS. These and drops at other networks follow a steady rate of declines in the past few quarters, according to research by MoffettNathanson. …

But the headwinds that Big Cable faces are much stronger than what might be deemed as a cyclical drop in viewership. In short, the most established players — think USA Network, Syfy, TNT, TBS, A&E, Lifetime, MTV, Discovery, FX, AMC, ABC Family, among others — are starting to grapple with the issues of audience erosion, rising programming costs and heightened competition for ad dollars that have bedeviled the Big Four broadcast nets for more than 20 years.

C3 combines three days of DVR viewing and live broadcast.

The result of this is a self-induced death spiral. To pick up lost cable customers, CBS News has just launched a free streaming news channel, and you will soon be able to subscribe to and stream HBO and the CBS network without being forced into an obscenely priced cable package. Dish will soon launch a bargain-priced streaming cable package that includes ESPN (sports!).

The death spiral is content providers reacting to the loss of cable customers by creating services that will almost certainly increase the number of cord cutters.  

Also … layoffs:

The industry’s response to the anticipated roller-coaster ride ahead is evidenced in many ways. Turner Broadcasting is implementing a mass staff cut of about 1,500 positions, through buyouts and layoffs, which are part of a larger cost-cutting initiative at Time Warner.

What truly terrifies the multi-nationals that own most of the cable networks is the loss of carriage or affiliate fees — that’s the money dozens of low-rated networks earn just for being a part of your cable package.

Whether you watch crap like CNN or MTV or not, these left-wing sewage spewers are making money off of you. Currently, these appalling carriage/affiliate fees are more profitable for these networks than advertising revenue. This makes sense when you realize that although no one watches CNN, it is still available in somewhere around a 100 million homes:

With all the upheaval and the reallocation of resources, nothing is generating more jitters than the uncertainty about continued growth of the affiliate-fee revenue that is the lifeblood of basic cable.

In the dual revenue stream model, the coin collected from carriage deals outpaces advertising sales for almost every major channel. Last month, Nomura Securities analyst Anthony DiClemente released a provocative projection that for every 1 million subscribers lost by traditional multichannel video program distributors, the TV industry’s largest congloms would collectively lose about $600 million in affiliate-fee revenue.

If you’re wondering how in the world CNN and MSNBC can have almost no viewers but continue to survive, these fees are why (these fees also explain why your cable bill is so expensive). Currently, if you want Fox News but are forced into a package with CNN in order to get Fox News, CNN’s parent company, Turner Broadcasting, earns a piece of your cable bill whether you watch CNN or not.

What absolutely terrifies the likes of CNN and MSNBC is that there is no other format where these obscene carriage fees can be duplicated. Only cable and satellite are NETWORK driven. Every emerging technology, such as streaming, is CONTENT driven. People aren’t paying for networks, they are paying for individual shows and movies.

Network allegiance is dying, and so is appointment television; and with it goes the lucrative strategy behind monetizing both.  

It’s certainly possible for a CNN or MSNBC or any low-rated cable network to try a subscription-based format, but there is no way that will ever come close to replicating the evil genius behind forcing 100 million homes to pay for dozens of channels they never watch.

In this new world, some networks might survive, but not the CNNs and MSNBCs:

Turner Broadcasting CEO John Martin recently predicted a Darwinian thinning of the channel herd in the coming years as financial pressures weigh on programmers and distributors alike. …

“There are too many networks in existence today in the United States. You would not want to be the owner of a small niche network where you’re getting an affiliate fee, and consumers don’t give a crap about it — which is why we never did that,” Martin said during Time Warner’s Oct. 15 Investor Day event. “One of our competitors has 14 networks that are below the top 60. Goodbye.”

Bundled cable is nothing more than left-wing affirmation action that allows junk like CNN and MTV to survive and enter our homes even though we hate it. Streaming is changing all that, and for the better — both culturally and for our pocketbook.

Follow John Nolte on Twitter @NolteNC               


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