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Disrupting Cable Television

Happy New Years readers, make 2015 a great one!

2014 was the year that I finally cut my cable.

My wife and I aren’t really big TV watchers to begin with.  We quickly learned that between Netflix, Amazon Prime, Redbox, the local DVD rental shop (yes, we still walk to a rental shop near our place in San Francisco), and a good old fashion TV antenna, we are able to find more than enough entertainment for our TV watching pleasure.

Calculating the number of people cutting the cord in favor of streaming services like I did isn’t a precise science.  But as the following graph shows, the number of houses with high-speed Internet but no subscription to pay TV has been steadily increasing each year, a sign that more people are cutting the cable.

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Apparently, this doesn’t have HDNet founder Mark Cuban worried.  In an article on Business Insider last month Cuban stated he doesn’t think streaming will be killing cable “anytime soon.”

His reasoning is that he believes that while streaming shows is convenient, the shows we stream are only popular because they were first seen on cable.  Streaming services, like Netflix, need cable to “prove the worth” of programming before it moves streaming.

For those of you who have read my other articles about Clayton Christensen’s disruptive innovation (and/or read his book, The Innovator’s Dilemma), this sounds like a classic case of disruptive innovation in the making.

1) A new technology moves into the market (streaming media).

2) It is seen by the incumbents as being “inferior.”  It is “not what our current customers are asking us for” (“ok, our customers like On-Demand, but they only watch shows they already watched on our current services, they are asking us to release more high-quality shows on cable.”)

3) They keep doing what they think their customers want, only to watch their business taken over by the “inferior” competitor (“we’ll just keep making new shows, that’s what our customers really want”).

We’ll have to wait and see how this one plays out in the long run.

However, I find it funny that while Cuban argues that streaming services need cable TV to promote new shows, in the next breath he admits that Netflix has had success in developing and promoting their own shows:

“With the exception of five or six shows, their brand was established somewhere else,” he said.

Five or six shows?  Out of how many total?  From what I can tell, Netflix’ success rate is far higher than your average cable TV channel (however, I did spend my holidays watching Netflix’ new series, Marco Polo, and I wouldn’t mind having that ten hours back).

He goes on to say:

“We will evolve to a point where people will get what they want, where they want, when they want, but there will always be a front-end presentation,”

Um….isn’t that the whole point of cutting the cable?  Rather than paying for a bunch of channels I never watch and have no interest in supporting (Fox News, CNN, MSNBC, E!, MTV, QVC, etc., etc.), I pay to watch what I want when I want to watch it.

There will always be a front-end presentation?  Of course!

But does that front-end presentation have to be watching new shows at a prescribed time each week on a prescribed network?  House of Cards and Orange is the New Black would seem to suggest not.  Game of Thrones is so successful on HBO Go that the network feels confident to cut the cable itself now too!

Four years ago Cuban apparently wasn’t worried about cord cutting either.  Meanwhile, the number of people who have done it has more than doubled, Netflix is producing some of the best new TV shows out there, and HBO has announced that they are going to make their popular HBO Go streaming service available via subscriptions that do not require the subscriber to have cable TV.

This is one we’ll have to watch play out, but I’m willing to bet that in the not too distant future the model of paying for 100s of channels just to watch the shows you like on a handful of them will end.

There will be winners and losers, maybe the current cable companies and channels will adapt or maybe it will be new comers like Netflix, Hulu, Amazon Prime, or something totally new like…say…Apple TV (who knows, certainly worth keeping an eye on).

But one thing I am sure of, if the incumbents sit back comfortable that TV watchers “need” their current services, they are just asking to be disrupted.