Broadcast TV – Sword of Damocles pt. III.

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OTA broadcast given a second chance.

• While Netflix and Amazon continue to make inroads into the cable TV subscribing population, the old dinosaur of over-the-air (OTA) broadcast seems to be winning a second lease of life.
• Over the last 4 years I have been very negative on the outlook for broadcast (OTA and cable) as I have viewed the convenience and lower cost of on-demand viewing as a much better proposition for users (see here and here).
• However, while this prediction has been largely accurate, what I failed to take into account was the fact the OTA is free (ad supported) which I think is largely what lies behind its renaissance.
• A standard Cable TV subscription in 2016 cost on average $103.10 per month (Leichtman research group) for which a large number of channels come as a prepaid package.
• However, in reality, most users watch only a few of those channels meaning that it if they could subscribe to those channels individually, they would be in a position to save a lot of money.
• This is now becoming a reality as some of the most prized content now belongs to the streaming companies as well as other content creators making their content available as a subscription through the Internet.
• The most obvious response has been the well documented and accelerating cord cutting by US households unless the cable TV industry takes immediate and drastic action.
• The other effect appears to have been a substantial recovery in the number of households making use of OTA rather than cable.
• According to a Nielsen study commissioned by Ion Media, OTA only households has grown by 41% over the last five years to 15.8m households although this may have slowed significantly since 2015.
• Furthermore, this is not limited to older generations as the median age of households using OTA and not cable is lower at 34.5 years than the total households using TV at 39.6 years.
• Although the total number of households switching back to OTA-only may have slowed, there has been real growth in households that also have a fast broadband connection (nScreenMedia).
• This leads me to believe that users (young and old) are increasingly switching off cable and replacing it with a combination of premium streaming services and OTA TV.
• This allows the user to have access to a wide range of channels, almost all the content he was watching on cable at a much lower price.
• Consequently, while commentators are cautious on the outlook for TV advertising revenues in 2018 and beyond, I think that they could easily witness a recovery having been stalled for some time.
• While this gives OTA a reprieve, I still think it needs to act to prevent itself from becoming obsolete in the long-term.
• The obvious move is to make the entire selection of channels available on a single, free, ad-supported streaming service.
• That way the valuable spectrum can be re-farmed for a more economically productive use and OTA can ensure that it has a place in the future of the media industry.
• If it is really sharp, OTA will also seek ways to make its offering available in emerging markets which are highly price sensitive and willing to consume advertising in lieu of paying a subscription.
• I still think cable TV is going the way of the Dodo but OTA looks like it has been given some time to reinvent itself.