Recesssion May Not Be Entertaining For Cable TV
Posted on November 6, 2008
Posted by Tom Turnbull
Given that we are in a recession, there is a lot of talk about which sectors will be the hardest hit. The worlds of finance, real estate and automotive have been flat out slammed.
Some sectors are said to be “recession proof.” Pharmaceuticals, energy, insurance, and necessities are the obvious examples. So, what about entertainment?
Entertainment, as a whole, is relatively recession proof. However, certain segments are more vulnerable. There has been a fair amount of speculation that cable TV will be harder hit. NPR recently discussed this issue from the perspective of cost.
Cable TV’s vulnerability is even more pronounced when discussed in the context of the Internet. Eshwarya Patel recently noted:
[W]hen people start to make a choice between cable and internet, they will soon realize that they are better off cutting their cable television. On the internet, residents can get cable access for some channels, they can see old broadcasts on some of the websites. In fact, television stations will begin to stream all their channels online for free to tap into the internet audience.
MediaPost, citing a Wall Street Journal article, wrote:
The Wall Street Journal recently wrote about the growing number of adults who have stopped paying for cable TV because they can watch any programs they want online. Presidential debates can now be streamed live, shows on cable channels like MTV are available for free streaming, and the best moments from “Saturday Night Live” can be viewed on demand at Hulu.com and NBC.com.
If people had already started canceling their cable subscriptions before the recent economic events, it’s easy to imagine that more will do so in a recession. And that means that Internet video, which already commands some of the highest CPMs out there, will grow in popularity. Current predictions are that the market could reach $1 billion by 2010, but that could turn out to be an underestimate if more people than expected stop watching TV.
What this means is that cable TV has become relatively more vulnerable since Internet services such as Hulu have emerged. Simply put, if a consumer can get the same content online for free, why pay for cable? Additionally, the case for dropping cable is strengthened during difficult times.
This all bodes well for online providers of content. [Note: Clearly, big media understands this in that Hulu is funded by NBCU/Fox, Fancast is owned by Comcast and Sling.com is owned by EchoStar.]
Furthermore, this trend also bodes well for the growth of advertising around online premium content — even during the recession.
We’ll be watching these trends closely.
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