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Pay TV as we know it will be dead by 2025, and this is how it will happen

Mark Sullivan | Oct. 9, 2013
The pay TV industry is in transition, retooling itself to produce and distribute content that is streamed, not broadcast.

"Over-the-top video is not small anymore," says Brightcove's Lai. "Netflix has 100 million subscribers, 30 million of those are [U.S.] streaming customers. Apple has sold 13 million Apple TV devices. Compare that to the cable operators. The biggest of them, Comcast, has no more than 22 million subscribers. All the pay TV operators combined have about 95 million subscribers."

The beginning of the end for linear, scheduled TV will come when the Internet players have too many subscribers for the content rights holders to ignore, Lai says. When that happens—and it may happen more quickly than many people expect—the content owners will begin to break their exclusive content agreements with the pay TV carriers. Instead, they'll begin streaming their shows on their own websites, on video services like Amazon and Netflix, and via apps on platforms like Roku and Apple TV.

IDC's Ireland believes we may be moving into a period when people will have to choose between pay TV subscriptions and online video subscriptions. "You'll have a lot of consumers deciding whether Orange is the New Black or House of Cards outweighs Game of Thrones or Breaking Bad," Ireland says. "They will buy one or the other, but not both. They may decide the Netflix shows are more important, but then they might watch all of those shows and then go back to Comcast."

Absent their traditional monopoly on premium TV content, cable and satellite companies won't have much left to entice new subscribers or retain existing ones with. Content costs are high, and companies like Comcast and Time Warner Cable must pass those costs on to customers to earn a profit. When consumers can get much of the same content on the Web à la carte, the sound of cords being cut should begin to get very loud.

Right now, the old deals are still in place: Content owners are honoring their exclusivity agreements with pay TV operators. Sure, you can watch lots of HBO video on mobile devices using the HBO Go app, but not before showing proof that you've already paid your cable company for HBO service. However, content owners, led by sports leagues, are starting to flirt with models that dismantle the fortresses built by cable and broadcast TV companies.

Why online TV will destroy cable
The main reason online, on-demand TV will eventually overcome closed-network, scheduled TV is simple: People want to choose when they watch their favorite TV shows. They don't want to be locked down by a rigid network schedule. Pivot to the Internet, which respects schedules about as much as it respects geographic borders.

Advertisers are motivated to support streaming content, too. Unlike broadcast and cable TV, streaming video is relatively easy to quantify. A service like Netflix, for example, can provide advertisers with precise numbers on audiences sizes and viewer demographics.

 

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