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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.

"For advertisers, IP may have a slight advantage because it's easier to know what person the content is being delivered to," says IDC's Ireland. "Set-top boxes are communal devices, so advertisers can't really know who is sitting around watching the program running through the set-top box."

The lack of à la carte programming has long been the bane of pay TV subscribers everywhere. For a variety of reasons that we won't get into here (read the cable association's explanation), pay TV operators have always sold big bundles of channels to subscribers, while denying customers the opportunity to choose and pay for just the ones they want to watch. Sites like Netflix and Amazon have no channels to bundle. You pay a monthly subscription fee in exchange for the right to browse, search, and stream thousands of titles.

"People hate à la carte," says media consultant Richard Dougherty of the Envisioneering Group. "Many people say that à la carte might change in 20 years or so, but it will change in the next two years. That's because Netflix has changed everything."

Streaming media companies should also benefit from the wild popularity of serial dramas. Indeed, the TV content we love the most just works better on streaming TV platforms. Think about it: The modern serial drama isn't so much a TV show with a series of loosely connected episodes as it is a 13-hour movie broken into 13 hour-long segments. That model is perfect for binge viewing, and nothing facilitates binge viewing better than Netflix.

And people like to binge. According to a Nielsen report last month, 88 percent of Netflix members and 70 percent of Hulu Plus members say they've watched three or more episodes of the same TV show in one day. Viewers in the millennial generation are embracing streaming video like no other demographic, and they're not necessarily glued to a 46-inch screen in the living room. Nielsen says the amount of time spent in front of TV sets by people in the 12-to-17 and 18-to-24 demos has consistently decreased since 2011. And since these demographics are prized by advertisers, Hollywood will be forced to deliver its content where viewers want to receive it.

The content owners call the tune
TV's migration to the Internet is ultimately a matter of evolution, not revolution. There will be no explosions, no network chiefs diving out of windows onto Wilshire Boulevard. That's because the TV content owners—networks like NBC and HBO, big studios like Sony TriStar, and cable network conglomerates like Viacom—hold the cards today, and they will still hold the cards when Internet TV becomes the norm.

They own the TV shows. Everything else is just distribution.

 

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