Written by Guest | Last Updated February 24th, 2020Our goal here at BestCompany.com is to provide you with the honest, reliable information you need to find companies you can trust.
It's no secret that, unless something miraculous happens, pay TV services like cable and direct satellite transmission are heading into a long, long winter. As TV giants like Dish Network, DirecTV, and Comcast lose subscribers to cord-cutting alternatives like Netflix and Hulu, the survival of the satellite TV industry is uncertain at best. Dish projects it will lose as many as 2.5 million subscribers by 2020, and many companies in the industry are looking to expand into the wireless spectrum market.
And yet . . .
Despite the steadily dwindling subscriber base, revenue in the satellite TV industry is on the steady rise. According to Statista.com, one of the foremost statistics aggregation providers in the world, the satellite TV industry industry, in many ways, is alive and well.
Not only is the satellite TV industry consistently raking in tens of billions of dollars every year, but it is still growing at a fairly consistent rate. But why? Well, even though satellite TV is on its way out, the five following reasons suggest that it may still outlive us all:
1. Live events
Speaking in terms of the mounting competition between satellite, cable, and internet streaming services, there's something that the new kids on the block just don't seem to have figured out yet, and that's the streaming of live major events. The simple fact is cord cutters have limited access when it comes to live events. They can turn to the Internet, but in many cases, live streaming can take up a huge portion of bandwidth. Say what you will about the weather-dependent nature of satellite TV, but at least you don't have to deal with buffering issues or turn off your other devices just to watch your favorite shows.
Dan Cashman, executive producer and host of “The Nite Show with Danny Cashman,” addresses the benefit of live events that traditional TV has over streaming services. “The traditional TV model has countless benefits that streaming does not. Traditional TV offers local news , live and up to date from reputable sources, which proves vital in times of emergency. Many TV markets are returning to the model of local programming, offering newsmagazine, sports, and entertainment that is produced at a local level. Video sharing sites like YouTube has plenty of this content as well, but viewers need to weed through the hours and hours of video uploads that are not produced with the intent of entertaining or informing the masses.”
This includes live news (an area into which Hulu has made a small footprint), awards shows like the Oscars (which averaged 36.6 million viewers this year), and more. Of course, many of these events, including the Oscars, are also going the way of the satellite TV industry; 2015 saw a six-year low in Oscar viewership, down 18% from the previous year (though, to be fair, Ellen DeGeneres, who hosted the Oscars in 2014, attracted 43 million viewers — a 10-year high). Sure, the dip in viewership might be due to the host, but it could also be attributed to the fact that these live shows do not have the same pull as they once did. Who wants to sit through a three-and-a-half-hour awards show late at night when you can go to YouTube the next day and watch all the highlights instead?
Yes, we know: sports are also live events. But because of the massive revenue generated by live sports each year, they deserve their own section. Live sports have long been regarded as the "Holy Grail" of the cable-satellite industry. There has been some discussion as to whether internet streaming services will eventually offer streaming of live sports. The executives at Netflix have dealt with this question several times, and by no means rule out the possibility; however, they don't feel the value proposed by live sports streaming is enough for the company to change its model completely. According to Business Insider, Ted Sardanos, Netflix's chief content officer, says, "I don't think the on-demandness to sports is enough of an addition to the value proposition to change. I think the leagues have tremendous leverage in those deals."
Unfortunately for the pay TV industry, their competitors' lack of interest in live sports streaming may not be enough to stem the slow bleed in viewership and eventual revenue. Sardanos wasn't kidding when he said that the leagues - the NFL and the NBA ranking among the most profitable for the satellite TV industry — have a great deal of sway in the cost of media rights to their content. According to Bloomberg News, while satellite TV subscriptions decrease, the cost of sports media rights are projected to increase - substantially.
But, in the meantime, sports fanatics know they have only one place to really catch all the action. Following live tweets of the game, or searching for some questionable streaming site that may or may not carry viruses simply doesn't compare.
What the pay TV industry has going for it right now is the idea that, for the majority of programming, it's the first place to go for new episodes. As great as Hulu is, viewers are not able to access its network TV programming for a full 24 hours after a new episode airs. And while Netflix does offer a wide variety of movies and television series, many of their more popular selections are cycled in an out of Netflix's queue. Furthermore, Netflix is no better than cable or satellite TV at airing recent or critically acclaimed movies, often taking two years or more to do so. According to a story in The Huffington Post, this is because production studios see internet streaming services as the lowest-ranking revenue stream for their blockbuster hits, often relying first on DVD releases, digital downloads, then online rentals.
Or Goren, the founder of Cord Busters, shares one advantage that traditional TV companies have over cordless options. He states, “Less choice: This might sound counterintuitive because many [people] love the choice that cord cutting gives [them] — but some people don't want to have to sit and think about what they're going to watch. With streaming, you need to pick an app (Netflix/Amazon/Hulu/etc'), then go over all those shows and trailers that the companies are pushing at you... With a traditional TV company, you simply turn on the TV, and at most — you can flip through channels. Then, if you happen to see something interesting — that's what you're going to watch, without thinking about it too much.”
There's an old joke about the variety of programming on satellite TV that explains this shift away from channel surfing: "hundreds of channels to choose from, but nothing to watch." These days, rather than surfing through channels on television, people are surfing through movie and show options on Netflix and Hulu. Most millenials are familiar with what behavioral psychologists call “the paradox of choice.” Essentially, the more choices you are presented with, the less likely you are to reach a satisfactory outcome. Movie parties with friends often take more time trying to find a movie that everyone wants to watch on Netflix, than watching the actual movie itself.
4. Average revenue per user
As we mentioned at the top of this post, all pay TV providers are projecting a downward trend in subscribers over the next four years. So why the steady bump in annual revenue? It's because pay TV providers are actually receiving higher ARPU or average revenue per user. In other words, cable and satellite TV customers, on average, are becoming more and more valuable.
In fact, Forbes suggests that Comcast's increase in ARPU will eventually offset its subscriber loss; however, this is largely attributed to Comcast's increased monthly subscription fees, though experts also attribute the ARPU increase to pay TV providers delving into online streaming services. Unfortunately for the pay TV industry, steadily increasing their monthly fees will do little to retain their current subscriber base, let alone attract more subscribers over time. It's a basic law of economics: when you increase the price of a service, the demand goes down.
Last of all, pay TV services are not dead because of (cue the music:) tradition! Picture the pay TV industry as a huge train that has spent the last 50 or 60 years getting not only faster and faster, but also bigger and bigger. Satellite TV has been a part of the American consciousness longer than most of us have been alive, and will therefore take a great deal of time before it comes to a complete and halting stop. Your parents, and even your grandparents probably have some sort of pay TV service, and when you were a kid, you probably thought you were going to as well. This is something pay TV services have relied upon for generations.
Derek Szeto, a cofounder of Butter, states the power that tradition can have on satellite TV’s presence. He says, “Old habits die hard — if you grew up with a remote in your hand flipping channels, there is still a certain degree of comfort being able to flip channels and not having to explicitly decide what to what. How many of us have spent 10, 20 minutes just flipping through the different tiles on Netflix weighing what to watch?”
Unfortunately however, times change. Among the most significant customer demographics to cut the cord these days — the one that pay TV services have bet on to continue the tradition — is the 25 to 40 age group. Why? Because this is the group that is most likely to start families and pass their television viewing habits on to the next generation. As we have mentioned throughout this post, pay TV isn't going anywhere anytime soon; but as younger generations are taught to seek out programming through alternative means, it will eventually become a relic of the past.