Adding To The Noise

A critical view of new media, new technology and new marketing.

Cable TV Decline: Media Planning Gets Tougher

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Cable TV has been a growing media for most of its existence. Cable started out as a way for rural customers to get TV service because they couldn’t pick up TV signals over mountains and across long distances. But the real growth came when they were allowed to enter the city and suburbs attracting subscribers for new ad free movie stations and syndicated programming offered by super stations such as TBS. New subscribers were also attracted to 24 hour news, business and sports stations. As bandwidth increased, so did new stations offering specialized content to segmented audiences. This was very attractive to marketers who could now reach a more target audience with the impact of TV. Spot cable is also a lot cheaper than a network buy. Basic cable subscribers in the US grew from just above 20 percent in 1980 to just over 65 percent in 2005 (Media InforCenter website, 2010). But what is happening now? Will cable continue to grow?

In 2007 SNL Kagan released the report “Cable Futurecast: A 10-year Detailed Outlook For Cable TV Industry Revenue Streams” and predicted overall residential cable revenue to top $121 billion by 2017. This was a 77 percent increase from the 2006 levels of $68.6 billion. But that cable growth was depended on selling more services to existing customers because of anticipated declines in market share due to the increasingly competitive space. Advanced services on the digital video and IP platforms were expected to fuel growth along with video-on-demand, DVR, HD and other interactive services.

Three years later these predictions are starting to come true. SNL Kagan recently reported that for the first time in cable’s history they have seen a drop in total number of subscribers. In the second quarter of 2010, the number of cable subscribers dropped by 711,000 with six out of eight cable providers reporting their worst quarterly subscriber lost. Cable’s share of the pay-TV market also dropped from 63.6 percent to just 61 percent during the quarter. This is just a signal of an even more fragmented media space as more content comes from the Internet via Netflix, iTunes, Xbox Live and Amazon video on demand streaming movies and shows.

For media planners it will get even more complicated as media channels continue to fragment and the Web is brought to people’s TVs via cable and Internet enabled TVs. Streaming online video advertising that appears on sites like YouTube, Hulu and as Pre-roll on video news stories will be a remote click away from traditional :30 spots on Cable TV stations. Hulu Plus is expected to release soon as a subscription based service to bring their Internet content to mobile devices and TV. Content marketing will also increase as advertising step in to create original content for on-demand channels – this represents a entirely new pricing system and creative possibilities as people choose to engage in the ads.

Intermedia comparisons between traditional media are complicated and require sophisticated marketing-mix analyses. But as media continue to evolve and converge, choosing where to spend your marketing dollars will become an almost daunting task.

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Author: Keith A. Quesenberry

Marketing Professor with Industry Experience

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