The inevitability of the streaming revolution has sideswiped cable giant Viacom in ways so massive no one would have expected them just three years ago. The first destructive phase of the revolution is not massive cord cutting but rather a collapse of ratings and advertising rates as cable customers gradually alter their behavior by watching more and more streaming outlets like Netflix.
Cord-cutting is almost certain to follow. Why pay $150 a month for 500 cable channels you never watch when you spend all your time with streaming services that charge less than $10 a month? Until their customers cross that inevitable threshold, greedy, left-wing cable and satellite providers will have to deal with the first phase of extinction, which just hit Viacom like a meteor.
Viacom just announced a $785 million pretax charge due specifically to the ripple effect of the streaming revolution. Cable network ratings are collapsing, especially among those networks built specifically to attract the same young viewers most likely to embrace streaming. Nickelodeon is down -34%; Comedy Central -30%; Spike- 23%; MTV -34%.
Along with that crash in ratings comes a crash in advertising rates and, obviously, a collapse in revenues.
According the Wall Street Journal a real tragedy struck 400 Viacom staffers who were laid off as a result.
Viacom’s biggest problem is reruns. If you have suffered through any of those networks, the repeats are endless. The ads are even more punishing. As viewers drop off, some networks increase ads. This is called a death spiral. The more punishing the ads, the more people flee. For about $17 a month you can stream Netflix and Amazon — two services with more programming anyone could watch in a lifetime. They are also blissfully commercial-free.
Another problem for Viacom and its greedy ilk is carriage fees. Right now cable and satellite providers pay billions of dollars in carriage fees to these greedy Hollywood multinationals. In some cases, ad rates are not the biggest revenue sources for these networks, the carriage fees are. If you are a cable company and you want X-channel, you not only have to pay monthly fee per subscriber, you also have to pay for a bunch of other channels.
These costs are all passed on to the consumer, and this is why you are forced to pay $150 a month for 500 channels, 492 of which you never watch.
As ratings collapse, cable providers are emboldened to pay less or even drop networks altogether. The loss of carriage fees to low-rated networks like MTV, Comedy Central, MSNBC and CNN would be devastating. If those networks were forced to survive only on the merit of ad rates based on viewership, they would be greatly diminished, or possibly go out of business entirely.
Carriage fees are the affirmative action keeping dozens of left-wing cable networks profitable. Once that disappears, everything changes. The whole culture changes.
Imagine a world without CNN and MTV.
You can if you do your patriotic duty and cut the cord.
John Nolte on Twitter @NolteNC