Brendan Whitt

WHEN BRENDAN WHITT THINKS...

Blought #27: Cable's Deathbed

The model used by Adelphia for my family's cable box from
the late 90's the mid-late 2000's
As far back as I can remember my mom always had a cable subscription. I can remember watching old Nickelodeon shows like Legends of the Hidden Temple, Rugrats and Fox Kids’ X-Men on a black tube TV.

Then came the big clunky cable box. Now I could watch the animation giant Cartoon Network and their Emmy award winning programming (See Blought #11: The Evolution of Cartoon Network) along with a slew of HBO and Starz channels.
I remember sifting through the guide in awe that I didn’t have to watch the TV Guide Channel anymore to find out when something was coming on. Even better, by that time I was 6 and able to read a description about the upcoming episode of Sponge Bob or Dexter’s Lab.

Then 2008 happened. Mom took some employment hits and our cable subscription was severely downgraded, and I’m pretty sure we weren’t the only American family to cut down on our cable during the Financial crisis. It just so happens that around that time my mom began to get these weird red envelopes in the mail and inside would be a DVD. At the time I had no clue what Netflix was.

Netflix was founded  by Marc Randolph and Reed Hastings in 1997. The two of them had previously worked in the tech industry. Randolph had co-founded a computer mail order company which earned him the position of VP of Marketing of software company Borland International.

Hastings who was once a math teacher founded a software company and sold it for $700 million. Hastings then took $2.5 million and used it as the startup money for Netflix. Randolph had an initial idea to start an e-commerce site but couldn't come up with a product. The little light bulb went off in Hastings' head when he was charged a $40 late fee for Apollo 13. The rest as they say, is history.

If you ask me, put Hastings and Randolph in the history books because they have the cable companies on it’s heels. Netflix enjoyed great financial success and even bounced back from a slight decline with the growth of their streaming service.

Time Warner CEO Jeffrey Bewkes threw shots at Netflix in a 2010 New York Times interview stating "It's a little bit like, is the Albanian army going to take over the world? I don’t think so." He also claimed that  Netflix's DVD service had something to do with the decline in DVD sales.

Then in 2011 Bewkes retracted his statements. "things like Netflix are welcome additions to the infrastructure. They can monetize value for companies like [Time] Warner that maybe there wasn't... I've tried at times to be humorous about it, sometimes to make a point."

Netflix wasn’t the only company who had their foot on cable’s throat. Amazon Instant Video was rolled out in 2006. Netflix had been named a “potential competitor” of Amazon in 2005. Wal-Mart also attempted to get into the fray well before anyone else did in 2002. By 2005 they had scrapped their idea until they bought streaming service Vudu in 2010. Cable’s demise was even more imminent when  ABC\Disney, Fox Broadcasting and NBC\Universal Television group founded the joint venture Hulu in 2007. In an attempt to save themselves, Dish Network launched Sling TV which allows you to stream live TV without a cable subscription.

Over recent years lawmakers like former Presidential nominee John Mc Cain have tried to fight for the option of ala carte television. Now with options like Roku, Apple TV, Amazon Fire TV and Chromecast the cable box is beginning to disappear altogether. Even Direct TV has made their receivers and remotes smaller.

Cable just isn't a very economically sound choice anymore. Student debt and employment woes has it's foot on Generation X's and Millenial's necks. Rich Smith of Daily Finance.com believes Millenials have learned from the financial strains that Gen X has endured. He cites inflation, recessions and student and national debt as financial crutches for my mom's generation.

My mom recently removed all cable boxes from the house except for the DVR box in her room. Didn't matter to me seeing as how I don't watch much TV besides ESPN. She bought a Roku for the family TV and cut her spending from almost $200 amount to just under $150. For a young single millennial you can get all of the TV you want for around $40 a month with Netflix, Hulu and HBO GO accounts depending on add on like Hulu‘s offered Showtime subscription.

The only negatives of streaming are the sometimes enjoyable activity of channel surfing, ESPN and exclusive access to different channel's web content (Time Warner's TWC Pass). But with Disney owning ESPN and ABC owning Disney, I’m sure Hulu will fix that at some point. (Get on board CBS. I needs my football!)
Courtesy:  Business Insider via Pacific Crest


Cable was fun while it lasted. A report published by Business Insider this past summer suggested that while cable subscriptions are beginning to wane. Cable subscribers have suffered a growth of around -1.5% in subscribers while Netflix, Hulu and Amazon subscribers increased by 30% between 2013 and 2015.

 I’m no tech business insider but I predict most major cable providers are going to begin to either be bought out or move on to exclusively providing internet service and other services like Time Warner’s smart home. The old coaxial cable is slowly being phased out. Sometimes I wonder if my future children will even watch cable.

Sites:
http://www.dailyfinance.com/2013/06/04/why-gen-x-cant-save-money/
http://www.businessinsider.com/cable-tv-subscribers-plunging-2015-8