Effects of YouTube, Netflix, Hulu, and Amazon Prime on Standard TV Media

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Cable television is at the mercy of new revolution: streaming and Internet-based televisions stations, programs, and movies. Internet and media phenomena like YouTube, Netflix, Hulu, and Amazon Prime are streaming high quality content, original series, and original movies at an enormous rate, and guess what? There are few if any commercials.

One no longer needs to schedule time for a television program or movie, because they are available all the time on these types of media channels, something that cable television cannot always offer. This sample essay will discuss the future of television, or more accurately media viewing, is not cable television, unless cable television makes some rapid and large changes to its current offerings. 

The history of television

Satell offers a quick history of cable television in his article for Forbes’ website: television used to consist of only three major networks (think ABC, NBC, and CBS – you might remember, the peacock) which controlled all other cable television networks and planned their programming lineup to debut each fall, about the time that kids went back to school. When cable television joined the fray, subscription revenues were added to the fees obtained from advertisers and the viewing public numbers (Satell).

The switch in this tried, true, and old-fashioned television model has clearly changed with the advent of the Internet and numerous personal viewing devices, along with the demand for repeated viewings, quick viewings, and recorded viewings that can be accessed at any point in time, from any device across the world (Satell). Due to these various devices, what we originally called “television” is no longer a large light box that sits in the living room of our homes – and

“cable providers, if they are to survive, will have to innovate their business models” (Satell).

Televisions, computers, tablets, laptops, smartphones, and smart televisions are merging into one conglomeration of media devices which can access any type of media from the cloud. Increasingly, media streaming and storage devices are becoming popular, as technology such as Roku, Amazon Fire, and Apple TV take over the media viewing and access market (Satell). Satell stated that

“Cable boxes today mainly serve as gatekeepers through their agreements with broadcasters. That’s simply not a sustainable business model.”

Some customers must pay for a cable box in order to have access to Internet, as well, by which the cable companies are only prolonging their collective death or transformation.

The transformation of cable television

Television business models have always been built on advertising and subscription revenue streams; for instance, HBO and Showtime have garnered such a following with their original and R-rated programming that they can survive solely on that income (Satell). Many companies still work on a hybrid model in which advertising is supplemented with cable provider fees which provide them with the desired or popular programming viewers desire.

In the past, cable companies decided how much consumers paid, and whether or not a particular programmer was allowed a

“coveted spot on the cable box” or was hidden “deep in the back of the lineup” (Satell).

An excellent example of a new television-based business model, who was gouging customers although it did not have to pay the exorbitant cable provider fees; the company lowered their rates back to the original cost of around $8 a month due to consumer demand, and have since retained their customer base and then some (Weissmann).

Since Netflix doesn’t pay the cable providers’ fees, it “earns roughly the same per subscriber” as HBO and Showtime, Satell noted.

New programming models for TV

Consumers today want to access television shows, movies, and other media from any device they happen to have access to at the moment; this includes smartphones, smartTVs, computers, tablets, and laptops. What better time to catch up on that new TED video or your favorite TV show that during your morning and evening commutes? With programming channels like Hulu, HBO Now, and Amazon Prime, that consumer dream has become a reality – and cable boxes have become all but obsolete.

The companies driving this innovation are still receiving subscription revenues, as well. And this kind of access is not cheap. There are very few free programs on Amazon Prime, and the consumer can choose to pay for an entire televisions series season at a time, or pay for individual episodes, all of which adds up quickly. Satell put his money where his mouth was, and cancelled his cable service subscription – and did not miss it, according to his article.

Due to the ability to include profanity, sexual scenes, and more violence than network television, as well as step outside of the boring television box, HBO and Showtime programming have long been worth the price. With the advent of new streaming technology they are fast becoming the status quo for consumers, and continue to produce stimulating and groundbreaking programming that speaks to the artistic side of seedy, reality television and reminds us why we seek out art in the first place. Satell noted that many broadcasters “already offer a live stream through their apps.

In order to extend marketing activities, some companies maintain their own YouTube channels in order to market to mediaphiles who are constantly on the Internet and streaming video. Amazon Prime provides an increasingly robust selection of media and has recently signed Woody Allen to produce an original series for them (Plunkett). Yahoo is going to stream NFL games over the Internet, and Google has acquired YouTube as well as pioneering two streaming devices called Chromecast and Nexus Player.

Fiber networks: Pros and cons

Wehner noted that “Google is slowly changing” consumer reliance on cable Internet connections, as Google Fiber boosts speeds across the nation.

Time Warner Cable is boosting its speeds in response without raising prices, fearing the substantial impact this might have on its revenues in the near future (Wehner). Competition for cable television and Internet providers can only be a good things for consumers; it may bring down prices and up service quality, which can be an issue in many homes and businesses.

The basic infrastructure of the cable networks and the actual network of wiring and signals that allows cable television to work is part of the problem, and desperately needs updating if the cable networks are to survive (Wehner). If many of these infrastructures existed for each cable company, there would be chaos. As Satell stated,

“The lack of competition has more to do with technical limitations than backroom deals and handshakes” as consumers paying high cable television access charges might believe.

Fiber solutions are being enacted by companies like Google, Verizon, and others – these solutions offer equal or faster data transfer rates than cable lines do (Wehner). The process of installing these fiber solutions is comparable to rerunning all of New York or Paris’ subway tunnels, if they were networked all over the entire world; in other words, it’s a difficult and painstaking process.

In order to get fiber service at a home, a new aerial drop must be connected, or a buried cable must be run through your yard – yes, that requires an ugly trench to be dug (Wehner). While this might not be an option for many, the price decrease and faster speeds might be worth the extra cost and inconvenience in the long run. Just for reference, Verizon FiOS service costs at least $1,000 per customer, and this high cost has stalled the company’s fiber network installation project for the time being.

Fiber networks provide all necessary media and communication through one single cable, including television, telephone, and Internet – at extremely high speed and quality up to 1 Gbps (Wehner). At these speeds, getting off the cable grid has never looked more appealing. Priced at $70 a month, Charlotte, North Carolina will soon be the first place in the United States to allows 200 Mbps speeds (Wehner).

Merger between Time Warner and Comcast

In April of 2015, Comcast and Time Warner (the two most influential cable companies in the world) announced a merger plan (Stelter). After intense negotiations with the United States government and others who opposed what they saw as an all-out monopoly or unfair market advantage that would be created as a result of the merger, the deal fell apart.

Among others, the deal was opposed by the U.S. Justice Department’s antitrust division, who were nearing a

“recommendation to block the deal…[and recommending] a procedural move that would put the merger in jeopardy”.

In the end, Comcast decided against pursuing the merger, and the threat of Comcast’s increased market share of 57% was too much for the government to accept it.

Despite the failed deal, Comcast added 1.28 million high speed internet subscribers – spurring its growth to 21.96 million subscribers in 2014, according to the Trefis Team at Forbes. The triple play bundling packages at Comcast force/allow subscribers to combine television, phone, and Internet services into one bill, and “saves on infrastructure costs” by increasing operational efficiencies and economies of scale.

Neither Comcast nor Time Warner Cable (TWC) are in danger of immediate extinction in the communications market. For its part, Time Warner’s consideration of acquisition by Charter Communications is occurring now (“Comcast-TWC Merger). TWC increased its subscriber base by 657,000 in 2014, up almost three times its 2013 level of 2013.

Streaming instead of cable bring many new options and choices

Following in the footsteps of HBO, Showtime, and independent channels on YouTube, Netflix began the creation of original series in 2012 and 2013. “Orange is the New Black” and “House of Cards” were exponentially successful, and provided the basis for “Hemlock Grove” and “Lilyhammer,” new television series based on sinister small-town goings-on and crime-drama stories, respectively. It's not only cable, and large networks feeling the burn from quality content from streaming providers, but Hollywood is feeling the effects as well. 

“Turbo FAST” is a children’s series, an area also explored by Amazon Prime’s “Tumbleleaf” and “Wishenpoof,” two award-winning children’s series available to Prime members free of charge. Animated adult series programming has also taken off in the industry, with offerings like “BoJack Horseman” on Netflix, and “The Awesomes” featuring Seth Meyers of Saturday Night Live fame, as well as Kenan Thompson and Rashida Jones.

Netflix has premiered the wildly popular “Narcos” and “Marco Polo,” and  the critically acclaimed "Stranger Things". Hulu’s docuseries on sports mascots “Behind the Mask” is also critically acclaimed, and “East Los High” is a teen drama set in California “Alpha House” and “Betas” are Amazon Prime series based on political comedy and tech culture and startups (Sperry). 

Jill Duffy of PCMag noted,“Why would I pay to have access to more channels that I don’t watch than those that I do?”

Duffy has a point; with streaming subscription and services, consumers only have to watch what they want, when they want. No more surfing the incredibly inefficiently designed cable guides and using three different remotes to access programming, or find something that one wants to actually watch for more than ten minutes. Streaming devices and subscription services such as Netflix and Amazon Prime can be accessed from anywhere today.

The future of cable television networks like TWC and Comcast are not by any means dark, but they are in question at this point in time. Both of the cable networks need to carefully examine their marketing and business models in order to compete with giants like Amazon.

References

“Comcast-TWC Merger Called off; Where Do these Companies Stand Now.” Forbes. Forbes, 2015. Web. 28 April 2015.

Duffy, Jill. “Netflix Instant vs. Amazon Prime.” PCMag. Ziff-Davis, LLC., 2015. Web. 26 September 2012.

Plunkett, John. “Woody Allen to Make First TV Series for Amazon Prime.” The Guardian. Guardian News and Media Limited or its affiliated companies, 2015. Web. 13 January 2015.

Satell, Greg. “The Future of TV is Here. Can Cable Survive?” Forbes. Forbes, 2015. Web. 6 June 2015.

Sperry, April. “Netflix, Hulu, Amazon Prime Originals: Time to Cancel your Cable Subscription.” HuffingtonPost. TheHuffingtonPost.com, Inc., 2015. Web. 18 January 2014.

Stelter, Brian. “Comcast-Time Warner Cable Merger in Doubt: What Might Happen Next?” CNN. Cable News Network, 2015. Web. 22 April 2015.

Wehner, Mike. “Google Fiber is Succeeding and Cable Companies are Starting to Feel the Pressure.” Business Insider. Business Insider, Inc., 2015. Web. 15 April 2015.

Weissman, Jordan. “Netflix Say a $1 Price Increase Crushed its Subscriber Growth.” Slate. The Slate Group, a Graham Holdings Company, 2015. Web. 15 October 2014.