Let’s be honest: cable TV isn’t dead yet. The battle between Netflix and cable TV is well recorded, and many pundits continue to predict that Netflix will kill cable quickly and effortlessly. However, as time passes, we can all see that this hasn’t occurred yet – cable continues to hold a stable grasp on the viewing market.
The Growth of Netflix
Despite the powerful grip of cable on viewers, Netflix and other online television-watching websites are on the up, and are becoming increasingly well-used among the younger population. In 2013, the 18-36 year old group rated cable and Netflix equally – two years have passed since then, and Netflix is only becoming more popular – a 2012 study found that 39% of 13-54 year olds are monthly users of Netflix, a growth of 4% since 2011. Whether these increases are sustainable is another story – in 2014, Netflix experienced falling stock prices when its subscriber predictions did not meet the numbers they expected. Subscriber numbers in September 2014 reached 37.2 million people domestically, and 53 million members globally.
… And the Strength of Cable
In contrast, despite the threat of Netflix, cable TV is still going strong: 99% of U.S. households have a TV, and 56% of households have cable. With 115 million households, Netflix’s 37.2 million subscribers looks rather weak. Even the 53 million subscribers globally doesn’t come close to competing with the U.S. television stronghold.
TVs vs. Devices
While 99% of households having a TV is hard to compete with, the prevalence of other devices is slowly gaining in sheer numbers: 78% of American homes have fast Internet, and 94% of all American homes have an Internet connection; but this is nothing compared to the fact that the average U.S. household has five devices, and more than 6% of households own more than fifteen connected devices. Households owning more than 2 TVs are rare, but with the proliferation of cellphones, tablets, laptops, and desktop computers, all of which can access the Internet, it seems entirely possible that the sheer convenience of Netflix could overtake cable in due course.
There’s no doubting the fact that one major advantage that Netflix has is its lack of advertising. This is particularly clear when considering the differences between Netflix and Hulu. Hulu originally began with advertising interspersed within its programs as they streamed, albeit with a 4 minute load of ads per 22 minute show, in contrast to the 8 minutes of ads shown on cable TV. When Hulu introduced the ad-free HuluPlus, the number of viewers watching the ad-supported service sharply declined.
The use of DVRs is also growing: according to Neilson, in 2006 DVR use made up 1.6% of TV viewing time; by 2012, it made up 8% of viewing time. Part of the reason for this shift towards DVR use, is its ability to skip commercials. The Dish Hopper DVR is a particularly high-end use of this model, with the ‘auto hop’ feature which records TV shows ad-free.
The advertising industry is no small fish to contend with however: advertising works by reinforcing attitudes already held by consumers, and 83% of consumers noted that television had the most impact on their purchasing decisions. In 2013, it was forecast that approximately $171 billion would be spent on advertising that year, with TV to capture the largest share of this number, at 38.8% of all advertising spending. The TV advertising industry is so strong, the poor Dish Hopper DVR was even sued by CBS, Fox, and NBC.
Further Hurdles for Netflix
Netflix may have some further difficulties to overcome, without even considering the difficult market for subscribers and the powerful advertising industry.
The Verizon v. Federal Communications Commission case in 2014 created new issues for Netflix and other online content providers: the case determined that the FCC’s right to treat broadband providers as “common carriers” had been relinquished. This meant that broadband providers could no longer be regulated by the FCC Open Internet Order. This Open Internet Order (also known as the net neutrality rules) required that Internet Service Providers (ISPs) follow three key rules: transparency (including network management characteristics, performance, and conditions of service); no blocking (of lawful content, applications, or services); and no unreasonable discrimination.
This Court ruling meant that broadband carriers could now give preference to companies willing to pay extra fees for faster service: a result that has increased costs for Netflix and other streaming services. The FCC is now considering whether or not to reclassify broadband providers as “common carriers”, so that they can then be regulated by the net neutrality rules. Whether or not this occurs will be determined on 26 February this year.
Overall, Netflix is a fantastic service that provides easy, ad-free viewership of high-quality shows such as House of Cards. But the future for Netflix is uncertain, and the road that Netflix will have to travel to overtake TV will be fraught with difficulty. I tend to err on the side of believing that eventually models like Netflix will take over, due to both the sheer proliferation of Internet-connected devices, and their portability. I seriously doubt that we’ll see people lugging cable TVs around any time soon.