Flipping the Channel on Traditional Television

February 4, 2015

For years, many have posited that the death of the traditional television service provider is just around the corner. However, as those years have gone by, the likes of Comcast and DirecTV have done absolutely fine and even increased their customer base. The predictions of doom and gloom were largely attributable to the emergence and widespread use of online retailers to purchase digital copies of movies and television shows. It was believed that, much in the way Blockbuster saw its customers flock to online rentals, people would flock to online broadcasters. Instead, no such exodus has occurred as of yet. While it is true that online streaming services like Netflix and digital media retailers like Apple expanded rapidly, cable and satellite subscriptions have not necessarily suffered as a result.
One possible reason for the continuing strength of traditional television is that, at the time, the costs of a television subscription were far cheaper than purchasing shows and movies on an a la carte basis. Furthermore, as a corollary to this, the early years of online streaming suffered at the hands of a sternly ingrained television industry where agreements existed whereby programming could not be made available online until after an initial television broadcast. While Apple would sell you a season of your favorite show, you could not do so until after the season had completely aired. Netflix would eventually carry a show, but not until long after the season had actually aired. Therefore, early streaming suffered from major programming availability problems where consumers had a strong preference for watching their programming as soon as was possible. Finally, streaming a show or movie required a high amount of bandwidth that was not necessarily enjoyed by a majority of Americans. Without a good Internet connection, downloading a show could take as much as twenty-four hours further exacerbating the availability problems.
These concerns prevented the death of traditional television, but only for a time.

Today, most of the greatest weaknesses in digital streaming have since become strengths.

For example, television subscriptions have been ceaselessly growing in cost while Internet based options have steadily declined in cost. It is now possible to visit a network’s website and view the previous night’s programming free of charge. Those desiring to make permanent purchases may also do so the day after the original airdate and are able to purchase individual episodes if they choose. In addition to popular television shows becoming widely available online, Netflix and Amazon have begun producing wildly popular shows that are included as part of their respective subscription packages. These packages are a fraction of the cost of a basic cable package. Even less expensive, YouTube has become a juggernaut with user-made content that is just as popular as today’s best shows. Finally, Internet speeds are becoming much faster while remaining affordable. Today’s speeds permit almost instantaneous playback and mean that a person’s personal hard drive does not have to store a potentially large file.
The ultimate question then is whether this new entertainment landscape will finally strike the death knell of traditional television. While it is impossible to tell, the vast media infrastructure that has formed on the Internet is not the same animal it once was. There are new signs that television has been living on borrowed time. First, HBO, arguably one of the main reasons people bother to subscribe to a television package, has announced plans to offer online-only subscriptions. Unlike the major networks, premium channels like HBO and Starz rely on subscriptions rather than advertising for their primary source of income. As such, it does not seem to be a large leap for them to provide these services online and eliminate the middleman. But why do one or two premium channels leaving traditional television make such a difference in overall TV subscriptions? The simple answer is that, while a cable subscription offers potentially hundreds of channels, consumers only watch a very small fraction of them. As these popular channels leave, people have less reason to retain the television subscription. Perhaps in response to this, Comcast has even gone so far as to consider offering small bundles of channels as part of an online-online subscription. It is clear that a la carte viewing is becoming the new norm.
What implication will this have on the law? What will happen to the entertainment industry? These questions are complicated, but there will undoubtedly be major changes as a result of significant changes in how media is watched and purchased by consumers. Furthermore, there is the exciting possibility that shows that would otherwise never be made will spring up that are not backed by a major producer. The need to have a big producer make shows is undercut by the fact that a lower budget show can be made and sold at a commensurately lower price online without the stiff barriers to entry traditional television erects.