Article

Streaming Revolution

Changing Viewer Expectations Mean Big Changes for the TV Business

By Devin Felix

May 8, 2014


On the website of XMission, a Salt Lake-based internet service provider, you can find a graph showing the amount of data being transferred to the company’s roughly 10,000 home subscribers throughout a day. It shows a steady climb in internet use, beginning around 5 p.m. each day and peaking around 8 or 9 p.m. XMission owner Pete Ashdown says that climb is mostly due to one thing—people coming home from work or school, opening a browser or an app, and streaming movies or TV shows on Netflix. During those peak evening hours, video streaming can account for as much as two-thirds of XMission’s total internet traffic, Ashdown says. 

Until recently, consumers looking to unwind with a show had little choice but to turn to whatever was being broadcast at that moment on network or cable channels. But technological developments in the past few years have resulted in a proliferation of ways to access video and made an unfathomable amount of content instantly accessible.

These changes are causing a shakeup in the business models that have delivered video for years. Many consumers have grown accustomed to the internet’s ability to deliver what they want, when they want it, at little or no cost. Now they’re gravitating toward services that allow them to view video content with that same level of choice and flexibility and abandoning those that require higher prices but offer less flexibility.

“Consumers today are dramatically different from the consumers of five or 10 years ago,” says Virginia Lam, a representative of TV streaming company Aereo. “People are craving alternatives. The reality is media consumption habits are changing.”

State-specific data are hard to come by, but Utah is definitely part of the trend.

Changing Habits

For several years, national media analysts and reporters have reported slowing or even negative growth among new cable subscribers. Last November, Wall Street media analysts Craig Moffett and Michael Nathanson called the previous 12 months “the worst 12-month period ever” for paid TV providers (which includes cable, satellite TV and phone companies that offer video). In the third quarter of 2013, those companies lost a total of about 113,000 subscribers nationally. Ray Child, senior director of public relations for Comcast in Utah and Arizona, declined to give subscribership numbers.

Much of the decline in paid TV subscribership is due to so-called “cord-cutters”—people who have stopped subscribing to paid TV services including cable and satellite TV—as well as young people who have never subscribed and see no need to subscribe as they start their own households. A recent report by Experian marketing services showed the number of cord-cutters nationally increased by 45 percent from 2010 to 2013. Last year, 6.5 percent of U.S. households had stopped subscribing or had never subscribed to a paid TV service. That portion is nearly double—12.4 percent—among households with at least one person age 18 to 34.

The rise of Netflix, Hulu and other video streaming sites have led many to decide they can get all the entertainment they want without paying the increasing costs of a cable subscription (which, according to the New Yorker, have nearly doubled over the past 14 years, to an average of $156 per month). Experian’s report showed that 18.1 percent of homes with a Netflix or Hulu subscription didn’t pay for TV in 2013—an increase of 42.5 percent over 2010.

Another major trend in video consumption is a significant increase in the number of people who watch on mobile devices. Experian showed that 24 percent of all adults watch streamed or downloaded video on a smart phone in a typical week, and 12 percent watch on a tablet. Smart phones are the most common device for viewing internet video, which seems to indicate that consumers not only want to be able to choose what they watch and when they watch it, but also where they watch.

Pay TV providers have taken steps to adapt to these trends. Last year, Comcast launched X1, a system available to those with a cable subscription, which makes more than 35,000 products available on demand and allows users to watch through TV, browsers and mobile devices. About 90 percent of the content is available at no extra cost beyond the Comcast subscription fees, Child says.

 

Over the Airwaves and through the Internet

The results of a case that was argued recently before U.S. Supreme Court will determine whether Utahns will be able to access yet another streaming TV service. In August 2013, a company called Aereo began operating in Utah. Aereo allows users to stream live local TV broadcasts over the internet. It operates with a series of tiny antennas (one for each customer), which receive the same over-the-airwaves broadcasts that are picked up by home antennas. Subscribers (who pay $8 or $12 a month for the service) access those broadcasts through browsers, on mobile devices or on their TVs with streaming players like Apple TV and Roku. They can also rewind and record broadcasts, as with a DVR.

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