Last Year’s Tax Rate May Not Survive in 2013, but Your Cable Service Probably Will

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Image copyright Vicki France

Now that the fiscal cliff has collapsed, we can be pretty certain our tax bills are going up unfortunately. And a Reuters report in August suggested that cable/satellite TV subscribers are dropping like flies, with the industry losing 400,000 customers in just seven months. But as Peter Kafka aptly countered, these numbers are based on quarterly results not annual. And when you look at all of the data in the market, it is clear that paid TV is hardly dying.

In spite of a soft economy, with about 14.5 million unemployed Americans and 8.2 million under-employed, people are still holding onto paid television, and actually consuming more video than ever before. Netflix has crossed over 30 million subscribers in the U.S., Hulu is approaching three million, but only 2.65 million people in the country “cut the cord” from traditional paid TV service. In fact, Americans are still spending about 33 hours a week watching traditional TV (that’s 4.5 hours a day!), compared to 27 minutes a week of streaming video. So where is this TV revolution the pundits have been blogging about??

Maybe we need to stop thinking of cable TV the way we think of phone service. It’s easy for technologists to predict that streaming video will do to cable companies what Skype did to the telcos, but I propose a new lens to filter TV technologies: an App that replaces broadcast television is like saying Yelp should replace Taco Bell.

My contention is that a “TV revolution,” as some are calling it, is not in the cards. Instead, I see a “transformation” of TV taking place, and while transformations are far less sexy to blog about than revolutions, I think this one could be pretty fun and pretty lucrative for tech companies that get it right. First, let’s clarify “transformation” versus “revolution,” in the context of Web services and Internet Apps:

  • Revolutionary apps fundamentally overthrow an analog provider with a digital alternative. Examples: Skype is a substitute for your landline. iTunes is a substitute for Virgin Megastore. LinkedIn is a substitute for schmoozing. Match.com is a substitute for my pushy (but well-intentioned) auntie in India.
  • Transformative Apps make analog providers a more pleasing or user-friendly experience. Examples: Fandango makes going to movies easy and predictable. Foodspotting makes finding the perfect entree a delightful experience. Mint makes banking more manageable and transparent. Driving from San Francisco to a cabin in Tahoe is a breeze thanks to Google Maps. None of these technologies replace the desired outcome, but they greatly enhance the experience to achieve it.

All evidence and viewership data suggests that YouTube, Hulu or Netflix isn’t a substitute for the experience of gathering around a big-screen to watch the Super Bowl or the latest episode of American Idol. Apps that make the offline experience of watching traditional television better, more fun and more social will be far more successful than those that try to overthrow TV. The Twitter app on my phone, for example, is the perfect TV companion and primary beneficiary of this phenomenon.

There is no question that on-demand, instant access to great shows on the iPad or laptop is one of the coolest things ever, but this is proving to be additive and incremental to traditional TV viewership at the moment. Most consumers still love the experience of watching TV on the TV.

In 2012, the Olympics provided the perfect case study for the transformation that’s taking place. Between the live streams on NBC.com, real-time access to event scoring and the medal count, we have never had this much access to the Olympics in history. Nearly every major event was available online, and usage was tremendous. But what pundits failed to point out this past summer is that we did not give up big screen, traditional television. NBC’s primetime broadcast, which was all taped coverage, averaged 31.1 million viewers per night, which was up 12 percent from the Beijing Olympics in 2008! According to NBC, many people who watched events, streaming live to a Web browser, also watched them again on television.

We have 70 years of consumer behavior patterns established and burned into the American psyche. And on top of that, television is big business. It exists on $65 billion of advertising spending and $60 billion of subscription revenue, and that’s 125 billion reasons why the industry will resist this revolution. In stark contrast to my friends in Silicon Valley who have said that they want to “destroy television,” I strongly believe that television should be transformed. And those of us inspired by the opportunity to innovate in the TV industry should be thinking about the opportunity in a transformational way if we hope to succeed.

Ashwin Navin is the CEO and co-founder of Flingo, the largest publisher of Smart TV software including apps from FOX, A+E Networks, Showtime, the WB, Transworld and TMZ.


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