World War Three: The Battle Between Netflix, Cable, and Broadcasting

“I’ve got four kids under the age of 13,” says Gina Thompson, 37 from Burlington, North Carolina. “I don’t have time to watch TV, and when I do the last thing I want to sit through is a bunch of damn commercials.” This is a story that is all too common to the average American of today: as we rush through our busy and hectic lives the once finely crafted art of couch-potatoeism has long been forgotten. What people want today are television programs that are racy, attention grabbing, and most importantly- lacking in commercial interruption.

But what does this change me for television industry? With the rise in popularity among luxury online television providers, the value of cable TV and major networks decreases. Online providers such as Netflix and Hulu Plus provide original commercial free content- for a fee- an offer that is appealing for those with limited time.

“Netflix gains a lot of notoriety for its great original content, but people tend to forget that what they are paying for is really access to their favorite shows without advertisements,” says Shirley Halperin, Music Editor and American Idol specialist at The Hollywood Reporter.  “People, myself included, just want to watch our shows without interruption. The better programing [on Netflix] is an added bonus, and the better the programming gets, the more I see a shift from cable subscribers to only online subscribers.

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Numbers is the name of the game when it comes to television, and regular cable networks make money through advertisers. The process is a little bit of a doozy to understand, but it goes like this: Networks collect the data of their viewership, ratings, by enlisting a service The Nielsen Ratings. The information collected displays viewing behavior including who is watching what shows at which time. The networks then give this information to their advertisers who in return purchase advertising time based on the market they are trying to reach.

That was a lot to take in right? To put it plainly: Networks rely on advertisers to buy airtime based on data of who watches what shows when. But services like Netflix and Hulu Plus are taking away viewership from on-air television thusly are decreasing the incentive for advertisers to buy airtime.

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To only deepen the wound, Netflix and Hulu Plus don’t technically need to report how high their viewership is. They don’t have advertisers to keep updated, so they don’t use The Nielsen Rating system. But don’t let that fool you- just because Netflix doesn’t need to reporter it’s viewership doesn’t mean that they are hiding their success. In an article on Forbes.com, Richard Greenfield of BTIG (a global trading and fund services company) describes Netflix as becoming “the most watched cable network on television.” Basing his information of Netflix CEO Reed Hastings Facebook page saying “Netflix monthly viewing exceeded 1 billion hours in June.” That, according to the report, breaks down to about 80 minutes per subscriber per day.

Cable companies and networks should be worried.  As the amount of households with a TV, according to Nielson, drops from 99% in 2010 to 95.8% in 2012 networks are going to be loosing more viewers and on top of the drop in viewership. Brad Adgate, from Horizon Media, also predicts that “the average cable bill is about $86 per month, that should double to $200 per month by 2020 which means even more young, cash strapped viewers will abandon cable.”

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Yet the cable companies continue to fight on. Ben Lindsay, a Television blogger, calls on programing as the greatest tool that networks can use to fight back against Netflix. “Broadcasters lose the game with Netflix because of the FCC (Federal Communication Commission). They can’t keep up with what viewers want. Hot, sexy, racy, programming. Everyone these days are desensitized to sex, drugs, violence, and cursing. They [viewers] want to feel the tension and drama, that’s why cable channels like HBO and Starz are so great. Viewers add them on to basic cable packages, for an extra fee, and have access to the programing they want on multiple devices including online.”

Cable companies have the option to provide extra channels, such as HBO and Starz, which like Netflix, offer racy and award winning programing. At the 2013 Emmys, HBO won the most amounts of awards, 27, for their shows Game of Thrones, Boardwalk Empire, Veep, and The Newsroom. HBO continues to gain viewership because of shows like those even though Netflix gained notoriety for its show House of Cards becoming the first online delivery service to have a show nominated for an Emmy. To really save themselves, luxury programmers like HBO and Starz need to offer online packages that don’t require subscription to cable.

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Broadcast networks aren’t so lucky. Strictly regulated by the FCC, broadcast networks can see a downward spiral in viewership due to their lack of online streaming and the lack of racy content. In an effort to fight back against FCC regulation, according to Deadline New York, an online magazine, the networks ABC, CBS, Fox, and NBC in an open letter to the FCC call the FCC rules “too vague” and that they “clash with the broadcasters’ First Amendment rights, and that parents can control what their kids watch.” They continue to call the rules “archaic because the networks have lost so much cultural clout.” Regardless of their discontent, it seems very unlikely that the FCC would loosen regulation on programing and content laws.

What does this mean for the viewer? Well, if you desire better content, the switch to online streaming might just be right for you. Cheaper costing, with racier content, and continued access to a wide variety of favorite syndicated shows, all without commercials it what viewers are calling for, and that is exactly what Netflix and other online television providers are looking to sell.

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