It’s a big deal when an analyst as respected as Credit Suisse’s Stefan Anninger slashes his pay TV subscription forecast for 2012 to a 200,000 loss from a 250,000 gain, which is what he did this morning. But the rationale behind his decision is even more noteworthy: He cites a Credit Suisse-commissioned survey that found evidence of a youthful revolt against the pricey video packages. Lots of young adults aren’t cutting the cord; they never subscribe in the first place. Anninger says that while the evidence is still mostly anecdotal, “we are confident that a relationship exists” between high pay TV prices and declining subscriptions. And the growing group of “cord nevers” (as opposed to “cord cutters”) is “the biggest challenge pay TV will face over the next 10 years” after piracy and soaring programming costs — although “it does not feel like the industry is yet willing to admit that reality.” Execs still accept the conventional wisdom that the recent decline in pay TV subs is due to the weak economy. Once things improve, they believe, then young people will jump on the pay TV bandwagon — especially when they have kids. But Anninger says things could play out differently: These young adults and their children will have grown up “in a world in which the Internet (at least from a technological perspective) was capable of delivering a reasonably satisfying video experience” for free, or a lot less than a cable or satellite TV subscription. They’re content to watch shows on small screens, at less than high-definition quality, and are just as happy to spend time with social media and video games as they are to watch a sitcom, drama, or reality program. Pay TV providers only have one real choice, Anninger says: They must offer consumers lower-priced choices, for example packages that include fewer channels than operators pack into their popular expanded basic services. The view that pay TV will regain its footing when the economy turns “is Pollyannaish.” Although Anninger still favors pay TV stocks, and says that the industry isn’t going to fall off a cliff in the next year or two, “ignoring the risks associated with cord-neverism, will not help to solve an issue that has the potential to become an enormous problem.”

100% accurate.
I agree with one caveat – it’ll happen even faster than these predictions.
yes.
Yep! My friends either can’t afford cable or just watch Netflix, YouTube, Hulu, Crackle, or get something from RedBox.
The reality is that young people don’t have the disposable income to afford $50 to $120 a month for cable TV. Money that might go to cable goes to paying for phone plans or just just surviving.
I don’t understand how the great masters of the universe are so blind that they can’t see how a much poorer America just won’t have money to buy as many toys or extra services.
right.
“I don’t understand how the great masters of the universe are so blind that they can’t see how a much poorer America just won’t have money to buy as many toys or extra services.”
Because they figure those billions of those sure-thing prospective customers in India and China will be a much better substitute.
That is the reason the masters of the universe have been outsourcing jobs and factories overseas these past twenty years or more. As far as they are concerned, America is tapped out as a profit source and the above countries are the new cash cow.
I totally agree with Anninger’s prediction. While I cut the cable cord a couple years ago after my Comcast subscription price jumped more than 50 percent (after the “promotional price” ended, of course), I will NEVER go back. I haven’t missed cable one bit. Why would I pay $150 or more per month for way too many crappy cable channels shoveling horrific reality TV and recycled syndicated garbage, when I can select the shows I actually want to watch via Amazon (without the annoying commercials), Hulu, Netflix, ESPN3, PlayOn, etc. at a fraction of the price. The cable operators need to wake up. Their days are numbered…
I am a 55 year old cable subscriber. I work with mostly 20 year olds at my job. None of them subscribe to cable. None of them. It’s not an economic issue with them. They just prefer their computers. This is the future.
I’m a few years younger than you. I have a 17-year-old son. We occupy two different spheres from a TV-consumption standpoint. He takes no interest in most cable-TV product and lives almost entirely on Hulu, Netflix and YouTube. I like live news and sports but am coming around to the idea that I can stream anything I want, pipe it through the big TV, and drop cable altogether.
Anything you really want is streamable.
The younger demo never caught the TV habit, as there’s almost nothing on the cable lineup worth looking forward to, and the older demo is increasingly repelled by crap product, high prices and abysmal service. The old delivery model is disintegrating right in front of our eyes. I give it five years.
Heh–my retired 80-year-old mom loves cable for its huge sports packages. She’s a college b-ball/football fan and she gets to see her alma mater play. But she didn’t hesitate to get rid of Showtime and HBO when we had to start cutting back. She didn’t see the point of shelling out almost an additional $100+ per month just for the occasional great mini-series or blockbuster movie. And if she can’t swing this, it’s a sure thing 20-somethings who can’t find jobs (or get more than an apartment if they are lucky) aren’t about to pony up. Especially when net-surfing is more consistently interesting…:)
I watch Netflix using Apple TV and the experience is very nice. The video is high quality and its easy to find and select numerous videos.
Selection, of course, is still an issue. For my limited entertainment interests, that’s good enough, especially since the quality and usability are now so good I forget that I am using WiFi to watch video on my TV.
I completely disagree with this. I recently finished my senior college thesis on the changes in cable tv vs. network tv and I know the second I graduate and start receiving a paycheck i will pay for premium cable. People may age recognize how the quality of pay tv is improving over network and with the more HD tvs that are sold, the more we will want premium hd cable to make our purchase worthwhile. Almost every single one of my friends that has graduated recently has premium cable and I know that the majority of my friends will pay for premium cable when they graduate. We’re catching premium shows on sites like netflix and when this generation is making their own money, i’m project they will spend at least part of their paycheck on pay tv.
…All of that being said, feel free to lower the price of cable packages for us soon-to-be-out-of-collegers.
“I recently finished my senior college thesis on the changes in cable tv vs. network tv…”
There’s your selection bias, David. You personally care enough about television to have written a thesis on it. As for your friends, it’s not terribly surprising that they think just like you because, well, they’re your friends.
Meanwhile, there are lots of people (of all ages, btw) who aren’t as passionate about TV. If they like something, they’ll either catch it for free on their computers or if unavailable for free, pay for it ala carte through iTune, Amazon, etc. I still think they’re the wave of the future, if for no other reason than the simple economics and space constraints of who needs to buy an additional box to do what the computer already does?
I felt the exact same way when I was 23. Two years later I ditched cable. I understand there are plenty of people in this country who love sitting in front of their TVs every night from 6-midnight, but I think that younger generations aren’t of the same mindset. They have already become use to picking what they want when they want it. All the extra channels full of nothing and the constantly disappointing network programming have made the cost to benefit ratio of cable go off the deep end. I don’t need to see the “new” Board Walk Empire because I know in a matter of a few months I can rent it. With the noticeable exception of sporting events TV has become obsolete in my life.
“I don’t need to see the “new” Board Walk Empire because I know in a matter of a few months I can rent it.”
Yup–and watch whole seasons back-to-back, at that.
Your problem is that you’re focusing on Cable TV vs. Network TV. That dichotomy is no longer accurate as we’re beginning to see a fundamental shift to Cable/Broadcast TV vs. Digital Distribution model.
>> I recently finished my senior college thesis on the changes in cable tv vs. network tv.
This never happened.
liar or lobbyist
and if youre writing papers on tv in college, youll never earn enough to be able to afford PREMIUM CABLE like all your stupid little friends
Makes since to me. With Hulu’s premier subscription and all the networks posting their shows online, I am only missing three shows I normally would watch (or record). Nurse Jackie, Top Chef and Walking Dead. I decided I really didn’t need to watch Top Chef and since Walking’s season premier sucked, I could give that up to. My monthly cable bill went from $130 a month to $7.99. The only show I will miss is the return of Nurse Jackie but, wait, I can buy that off of Itunes for a couple bucks an episode (for a total of $36 per season). That’s still way cheaper. If I ever feel the need to expand my watching I figure I could subscribe to Amazon Prime and Netflix for an extra $20 a month and still save 1K a year. I will never go back to paying for cable. It just doesn’t make any fiscal sense.
Walking Dead’s 2nd season premiere sucked big time, but with new writers it seems to have now hit it’s stride. One of the best shows currently out there.
Perhaps “young people” object, just like “old people,” to the bundling of channels and are seeking cheaper, less encumbering ways to get just the programming they want and not have to pay for programming they don’t want.
While “ala carte” has been a dirty term to cable companies (just like “block booking” was to exhibitors before the 1948 Consent Decree), it might force individual channels to be, well, individual again, rather than each of them trying to please everybody and ultimately pleasing nobody. Fewer channels doesn’t mean less opportunity for producers, either, not where most channels are owned by the same six or seven companies and they just shift shows from 1 to 2 to 3.
Agreed–when you look hard at cable’s vaunted endless choice, it’s clear you don’t get nearly as much as you do when you go the Hulu/Amazon Prime route. In forcing people to pay for bundles instead of giving them real selection power, the cable industry has made itself unappealing to younger audiences who aren’t about to be forced to buy anything they don’t want, period.
Pay TV needs to start making serious changes if they want to stay viable. Part of this is each network having a true target audience that is not based solely on age.
There is also the issue of the content that is being provided. BBC America shows heavily edited versions of British series. Since it is not a basic cable channel there is no reason for them to be doing this. Why would an audience want to watch an edited version of a series when they can find the original episodes online?
This also goes for series from other countries that are reedited for American audiences, replacing the original narration with an American voice. This is disingenuous and turns people off.
Cable networks have not kept up with the times when it comes to the content they provide, how they schedule programming, and who they target. Today BBC America shows American made series, which seems to be a violation of their very reason for being.
And let’s not get into why I can’t get any channel from around that world I want to see. This is America. Land of the free. And we are supposed to be the most open society in history. And yet I can’t see the BBC (not even legally online) or channels from Australia or even South Korea.
Pay TV has to be willing to make some significant changes if they want to be around in 10 years. And it’s going to take replacing those at the top with people who have a global view of the world and not focused solely on making as much money as possible as quickly as possible.
I’m not sure I buy the doom and gloom of this prediction, but there is some truth in it. Cable and satellite providers need to start thinking about changes such as the cheaper packages and/or à la carte pricing. Granted à la carte pricing would spell the end of some niche channels, but isn’t that the point of competition? Pay TV providers are always bragging about the number of channels they offer, but who really has the time or the inclination to watch all of them? I have probably 20 channels I’ve never even looked at on my service. If I could pick the channels I want I might have, at most, 25 (and that includes by local stations).
Charge more for Internet access and less for the TV portion is my guess on how they’ll handle this.
You are going to pay one way or the other.
I agree with this. Since companies will continue to merge and have ownership of both your cable and internet, they will just shift the higher price to your internet.
Their ability to hold a monopoly on internet access going into the future is extremely limited.
they’ve done fine so far
Yep. With the internet, cable is no longer necessary. Instead of paying a monthly cable bill, I just purchase the shows I want to watch ala carte from iTunes. Cable companies are going to need to offer more flexible subscription based plans if they are going to be competitive in the coming century. Pretty much the only people I know that still have cable work in entertainment/media related fields and for them their cable bill is a tax write off.
This is sad news in general. The best show on tv is on Showtime (“Homeland) and the projects I’m most looking forward to are coming down the pipeline at HBO. I also love seeing films on opening weekend when the audience is the most jazzed to see it. Guess I’m a dinosaur.
HBO has HBOGo.Com… so theoretically, they COULD offer it to anyone who’s willing to pay. I agree with you on the programming. If they offered just HBOGo.com, I’d buy it in a heartbeat!
100% accurate.
People can also use an antenna to pick up ABC, NBC, CBS, FOX, CW etc over the air. Los Angeles has the widest selection of channels for any American televison market, over 70 when you take into account digital subchannels. When my roommate moved out I cancelled cable and just went with an antenna. The only thing you really miss is live news and sports.
It is unfortunate that using free antenna reception is often overlooked in these “cord cutting” news stories. 15% of the population does this already. But antenna viewers don’t bring in retrans revenue…
Theoretically… that’s what Advertising is technically for; to support the “freeness” of the antenna. And that’s why the current Advertising focus is so flawed. It’s based on a very antiquated system. But, yes, there’s NO CHARGE for using the antenna.
“The only thing you really miss is live news and sports.”
…and every show on cable.
Which I can almost always find online for just the ad-time. sorry, paying $80 a month to watch 30 Rock is just not going to happen.
You know 30 ROCK is on network, right?…
HBO will be free to consumers… if they pay $$$loads for (real) high speed internet access.
Only thing that’s keeping me (and most sports fans I know) from cutting the cord is live sports. MLB and NFL are streamable – once NBA, NHL, golf, tennis, etc. modernize their streaming capabilities, the transition will be complete.
the nfl doesnt stream. unless youre talking that ps3 thing. but isnt that like $300?
A good place to start would be..BETTER PROGRAMS…just saying
What you’re “just saying” is wrong. I can watch Breaking Bad, Mad Men, Dexter and hundreds of other shows through Netflix on my Roku Box. Anything that’s not available, I could probably find on Amazon Prime for the same price as a DVD. Just like my ipod has made it possible to completely customize my listening experience in the car and avoid hearing “Hotel California” for the billionth time, what I watch and when I watch it is totally up to me now too.
I’m a current DirecTV subscriber, but that’s only because I just had a baby and knew the only way I’d be able to watch football this fall was with the NFL Sunday Ticket. The promotional deal also included 3 months of all the premium movie channels, and honestly, I couldn’t imagine a bigger waste of money. My Netflix Instant Queue is much more interesting than the bad 80′s movies Showtime and HBO repeat all day long.
In the interest of demos, I’m a 31 year old male. I imagine Jim to be much older.
there are so many good tv shows on right now. youre just too stupid and lazy to find them
Since I am pretty sure that I am half the age of the next youngest Deadline reader (I’m 21) I think that I may be able to shed a little light on this. I go to college and I can tell you that with the exception of one of my cheap ass friends, every single one of us has cable. Not only do we have cable, but almost all of us subscribe to HBO due to their continued offering of amazing programming. Personally, I “pirate” a lot of shows but for the most part it is just so I can re watch episodes from channels that I pay for and OnDemand pisses me off because of how laggy it is. I can also tell you that I own an Xbox and I have only approximately 20-25 total friends on my friends list, yet unless I log on in the middle of the night, one of them is browsing through or watching a show. Of course, as soon as the media reports something like this, all of you stupid ass people panic and sell stock right away, but please, continue in your ignorant ways. I implore you to. I’m trying to get Netflix stock down as low as possible so I can buy it before they expand to the UK and House of Cards premiers and people remember how awesome it is. But then again, if a kid will sit in his dorm room and watch a movie in shitty quality for free, what’s to say he won’t do that when he has a real job, a good income and kids. What little kid doesn’t want to sit crouched over a computer watching Toy Story 8 in terrible quality when he sees all the commercials for the 4D IMAX home entertainment system (I’m assuming that is what will be out by the time I have kids)
How many of your friends cable is being paid by their parents? It’s different when you’re paying cable with your own money and don’t have cash to spare.
house of cards will not bring 1 new subscription to netflix
I am 27. I know a lot of people who have recently graduated from college and do not have a full-time job. Many of those people would like to have cable, but they do not since they want to be able to eat and pay rent.
Im in my mid-40s and plan to discontinue my Directv subscription when my contract expires. The first year was great but once the prices increased, its just not worth it. I feel I watch too much TV anyway. Some shows I can watch for free online depending on the network…Otherwise, I will get an HD antenna and get the free broadcast channels (It seems like theres not a cheap or was alternative to DVR/tape OTC channels – I don’t want to buy a monthly Tivo subscription as that would defeat the purpose of cutting the cord..I just figure I can ‘waste’ time with cell phone games, computer videos etc)….Also ironically Comcast called me last week with a ‘special deal for satellite customers” where they wanted to come to my home to increase my internet speeds and give me some free on-demand programming…It was strange – why do you need to come to my home? I asked the woman if there was a catch – she kept saying no…She wanted to set an appointment – telling me I can cancel – so I was getting ready to do that and she goes into her speech and immediately I hear her say that the ‘promotional pricing’ will end after a certain number of months and I SAY WAIT WAIT WAIT — -I asked you if there was a catch and you said no -and now youre telling me that this ‘free upgrade’ is going to cost me extra every month after an introductory period. I knew t here was a catch…Ironically I had told her I would consider going back to Comcast when my Directv expired….but this was a shady way for them to try to hook me in and increase my price. It really left a bad taste because it was practices like this that made me finally cut the TV cord with Comcast…
Im cutting the cord…Hopefully the free Youtube channels will have some good content. I want to watch less TV – and certain shows I can watch online – If networks don’t offer that option, I won’t watch their shows. And I don’t want to pay for dozens of ESPN channels I don’t watch – or dozens of Jesus channels…and other stuff. I just have 2 TVs with Satellite with one DVR (and no HDTV) and its $75 a month -too much….Bought an HDTV and a $25 antenna and get all broadcast channels for free…
It took an Analyst to discover this groundbreaking news?
Goodbye (useless?)Cable Execs…Development peeps, Producers. EP’s blah blah over paid corporate (Marketing, BALA, etc)desk. Soon you will have to get a real job and then REALITY will really set in.
Hello Ala Carte pay what you want ! Where have you been all my life?
Sorry to hear about the shrinkage Sag/Aftra/WGA but you guys will stay in business, you’ll still be significant.
HoldingBreath
This is spot on. The traditional media companies need to pull their heads out quickly. The economy has nothing to do with their situation. Younger people are growing up with more choices that are less controlled and much more affordable.
When everyone with cable or satellite pay $8 a month for Espn even though most don’t watch it, their dynamic is broken. The networks spend millions to get viewers then do everything possible to make it impossible or too costly to follow a show if you miss an airing of an episode.
They all continue to spiral down the drain with short term thinking
“at less than high-definition quality”
Are you f… kidding me? In couple hours there’s episode of TV show to download with same quality as in TV. If BR comes out, you can download it. Even better, you can put it on your NAS and stream it to your TV wirelessly and then watch it on projector.
Wake the f… up with piracy and prices!
I’ve made my living in tv for twenty years so I have a bias towards watching both broadcast and pay tv, but in my house we are fitting ready to replace all if the tvs with the new flat screens that come wireless internet ready so that we can do exactly what this article describes. Subs to internet, Hulu, netfix and amazon is still cheaper than full blown cable and I can wait to check out hbo series.
Although if they were smart, all pay cable channels would have a web only rate for their original programming. I’d pay 9 bucks a month for access to hbo series online if I didn’t have to have cable.
You can wait for HBO series? I agree with you on everything except that. I believe HBO will need to set up a way to access HBOGo without having a cable or satellite subscription. HBO continues to put out the best content whether you are 18 years old or 60 years old. They will find a way to keep up with the game. As a true lover of television, I can tell you that I can not wait whatever time period before shows like Boardwalk Empire, Bored to Death, Eastbound and Down, etc. come to Netflix/DVD. And the trailers for the new show, Luck? Showtime, Starz and AMC are going to be the ones left behind.
I appreciate that HBO wants to protect its revenue (and their brand) by not making its shows available via iTunes or Hulu but any dedicated web surfer can find a stream of their favorite HBO show with 15 minutes of googling. HBO is great but it’s not worth spending $70 or $80 a month. Once enough people cut the cord, HBO will have to find alternate methods of distribution…i.e. the Internet.