and are reshaping how we watch TV. As cable costs rise, viewers are ditching traditional subscriptions for streaming services. This shift offers more choice and flexibility but challenges the old TV business model.
Streaming platforms like and are now major players, investing in original content to attract subscribers. Meanwhile, cable companies are adapting with and their own streaming options. The future of TV viewing is increasingly personalized and on-demand.
Defining cord-cutting and unbundling
Cord-cutting refers to the practice of canceling traditional cable or satellite TV subscriptions in favor of streaming services or other alternatives
Unbundling is the process of breaking up channel packages and allowing consumers to select and pay for individual channels or smaller bundles
These trends reflect a significant shift in how people consume and pay for television content, driven by technological advancements and changing consumer preferences
Factors driving cord-cutting
Rising costs of cable subscriptions
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Cable TV prices have consistently increased faster than inflation, making subscriptions less affordable for many households
The average monthly cost of a cable package in the US exceeded $100 in 2020, leading many consumers to seek cheaper alternatives
Hidden fees, equipment rentals, and long-term contracts further contribute to the perceived high cost of cable
Availability of streaming alternatives
The proliferation of streaming platforms like Netflix, Hulu, and has provided consumers with a wealth of on-demand content at lower prices than cable
These services offer flexibility, allowing users to watch on various devices and cancel anytime without long-term commitments
The increasing quality and quantity of original content on streaming platforms has made them more attractive to consumers
Changing consumer preferences and habits
Younger generations, particularly Millennials and Gen Z, have grown up with on-demand streaming and are less likely to subscribe to traditional cable
Many consumers prefer the convenience and personalization of streaming, which allows them to watch what they want, when they want, without being tied to a linear TV schedule
The rise of mobile devices and high-speed internet has made it easier for people to access streaming content on the go, further shifting viewing habits away from traditional TV
Impact on traditional TV industry
Decline in cable and satellite subscribers
As more consumers cut the cord, the number of cable and satellite TV subscribers has steadily decreased
In the US, the number of pay-TV households dropped from a peak of 105 million in 2010 to an estimated 82.9 million in 2021
This decline has put significant pressure on the traditional TV industry, forcing cable and satellite providers to adapt their business models
Reduced revenue for cable networks
With fewer subscribers, cable networks have seen a decline in revenue from carriage fees, which are the payments they receive from cable and satellite providers for including their channels in bundles
Advertising revenue has also been impacted, as fewer viewers translate to lower ad rates and a shift in ad spending towards digital platforms
This financial pressure has led to budget cuts, layoffs, and consolidation within the cable network industry
Pressure on legacy business models
The traditional model of bundling channels and selling them as packages has become less viable as consumers demand more choice and flexibility
Cable and satellite providers have been forced to offer skinny bundles and streaming options to retain subscribers, often at lower profit margins
Legacy media companies have had to invest heavily in streaming platforms and original content to compete with digital-native companies like Netflix and Amazon
Rise of streaming services
Overview of major streaming platforms
Netflix, the pioneer of subscription-based streaming, has grown to over 200 million subscribers worldwide, investing billions in original content
Other major players include Amazon Prime Video, Hulu, Disney+, HBO Max, and Apple TV+, each with their own unique content offerings and pricing models
These platforms have disrupted the traditional TV landscape and have become increasingly popular with consumers
Original content as key differentiator
To stand out in a crowded market, streaming platforms have invested heavily in original, exclusive content
Netflix has seen success with series like Stranger Things, The Crown, and Bridgerton, while Amazon has had hits with The Marvelous Mrs. Maisel and The Boys
Disney+ has leveraged its vast library of IP to create original content like The Mandalorian and WandaVision, which have driven subscriber growth
Subscription vs ad-supported models
Most major streaming platforms initially relied on a subscription-based model, where users pay a monthly fee for access to content without ads
However, some platforms like Hulu and Peacock have offered lower-priced or free tiers that include ads, providing more options for cost-conscious consumers
As the streaming market matures, there has been a trend towards hybrid models that combine subscriptions and advertising, as seen with the introduction of ad-supported tiers on Netflix and Disney+
Unbundling of TV channels
Shift from channel bundles to à la carte
Traditionally, cable and satellite providers have sold channels in bundles, requiring consumers to pay for a large number of channels, even if they only watch a few
The rise of streaming has led to a demand for à la carte options, where viewers can choose and pay for only the channels or content they want
This shift has put pressure on the bundling model and has forced traditional providers to offer more flexible options
Emergence of skinny bundles and vMVPDs
In response to the demand for more affordable and customizable TV packages, cable and satellite providers have introduced skinny bundles, which are smaller, cheaper packages of popular channels
Virtual multichannel video programming distributors () like Sling TV, YouTube TV, and Hulu + Live TV have also emerged, offering live and on-demand TV over the internet without the need for a traditional cable subscription
These options provide consumers with more choice and flexibility, but they also pose challenges for less popular channels that rely on being included in larger bundles
Challenges for niche and specialty channels
As unbundling becomes more common, niche and specialty channels that cater to specific interests or demographics may struggle to attract and retain subscribers
These channels often lack the broad appeal and marketing budgets of larger networks, making it harder for them to survive in an à la carte environment
Some niche channels have adapted by launching their own streaming services (ESPN+, BritBox) or by partnering with larger platforms to be included in their offerings
Broadband infrastructure and net neutrality
Importance of reliable high-speed internet
The growth of streaming and cord-cutting has made access to reliable, high-speed internet more important than ever
Consumers need sufficient bandwidth and low latency to stream high-quality video without buffering or interruptions
The COVID-19 pandemic has further highlighted the importance of broadband, as more people have relied on the internet for work, education, and entertainment
Debates over net neutrality regulations
is the principle that internet service providers (ISPs) should treat all internet traffic equally and not discriminate or charge differently based on the content, user, or platform
Proponents argue that net neutrality is essential for ensuring an open and fair internet, preventing ISPs from prioritizing their own content or charging streaming platforms for faster access
Opponents claim that net neutrality stifles innovation and investment in broadband infrastructure and that ISPs should have more control over how they manage their networks
Role of ISPs in the streaming ecosystem
ISPs play a crucial role in the streaming ecosystem, as they provide the infrastructure and connectivity that enables consumers to access streaming content
Some ISPs have launched their own streaming services (Comcast's Peacock, AT&T's HBO Max) or have partnered with existing platforms to offer bundled deals to their subscribers
The relationship between ISPs and streaming platforms has sometimes been contentious, with disputes over issues like interconnection fees, data caps, and network performance
Advertising in the streaming era
Decline of traditional TV advertising
As cord-cutting has accelerated and viewers have shifted to streaming, traditional TV advertising has seen a decline
Advertisers have followed audiences to digital platforms, allocating more of their budgets to streaming and online video ads
The fragmentation of the TV landscape has made it harder for advertisers to reach mass audiences through a single platform or program
Targeted ads and personalization in streaming
Streaming platforms have the ability to collect detailed data on viewer preferences and behavior, enabling more targeted and personalized advertising
Advertisers can use this data to reach specific demographics, interests, or viewing habits, potentially increasing the effectiveness of their campaigns
However, the use of viewer data for advertising purposes has also raised concerns about privacy and data protection
Product placement and brand integrations
As consumers become more adept at skipping or avoiding traditional ads, product placement and brand integrations have become increasingly common in streaming content
These strategies involve incorporating products or brands into the storylines or settings of shows and movies, often in a subtle or organic way
While product placement can be an effective way to reach audiences, it can also be seen as intrusive or inauthentic if not executed well
Global perspectives on cord-cutting
Cord-cutting trends in different countries
While cord-cutting has been most prominent in the US, it is a growing trend in many other countries as streaming platforms expand globally
The pace and extent of cord-cutting vary depending on factors such as broadband infrastructure, content preferences, and the strength of traditional TV providers in each market
In some countries, like Canada and Australia, cord-cutting has been slower due to limited streaming options and the bundling of TV with other services like internet and phone
Role of regional streaming services
In addition to global streaming giants like Netflix and Amazon, many countries have seen the emergence of regional or local streaming services that cater to specific languages, cultures, or content preferences
Examples include iQIYI and Tencent Video in China, Hotstar in India, and Stan in Australia
These regional services often compete by offering local content, lower prices, or partnerships with telecom providers
Piracy and unauthorized streaming
The growth of streaming has also been accompanied by an increase in piracy and unauthorized streaming, particularly in countries where legal options are limited or expensive
Piracy can take many forms, from illegal streaming sites and apps to password sharing and the use of VPNs to access content from other regions
While piracy remains a significant challenge for the streaming industry, some studies suggest that the availability of affordable, convenient legal options can help reduce piracy rates
Future of cord-cutting and unbundling
Projections for cable vs streaming market share
Industry analysts predict that the number of cord-cutters in the US will continue to grow, with eMarketer estimating that the number of pay-TV households will decline to 72.7 million by 2023
Streaming is expected to continue gaining market share, with some projections suggesting that streaming revenue will surpass traditional TV revenue in the US by 2024
However, the growth of streaming may slow as the market becomes more saturated and consumers face subscription fatigue
Potential for rebundling and aggregation services
As the number of streaming platforms proliferates, some experts predict a trend towards rebundling, where services are combined into packages or offered through aggregation platforms
This could make it easier for consumers to manage multiple subscriptions and discover content across different platforms
Examples of aggregation services include Amazon Channels, Apple TV Channels, and Roku Channel, which allow users to subscribe to and access content from multiple providers through a single interface
Long-term sustainability of streaming business models
As competition in the streaming market intensifies, there are questions about the long-term sustainability of current business models
Many streaming platforms are investing heavily in original content and are operating at a loss, relying on subscriber growth to offset costs
In the long run, platforms may need to find ways to balance content spending with profitability, potentially through price increases, advertising, or consolidation
The success of streaming business models will also depend on factors such as consumer willingness to pay, the impact of economic conditions, and the ability of platforms to retain subscribers in the face of increasing competition
Key Terms to Review (23)
Advertising strategies: Advertising strategies refer to the methods and plans used by companies to promote their products or services effectively. These strategies are designed to reach specific audiences and engage them through various channels, including traditional media, digital platforms, and social media. As consumer behavior evolves, these strategies must adapt, particularly with the rise of technology and changing viewing habits.
Amazon Prime Video: Amazon Prime Video is a subscription-based streaming service offered by Amazon that provides a wide selection of movies, TV shows, and original content to its users. It connects to various aspects of online streaming, digital distribution, and technological advancements, enabling viewers to access content on-demand while also influencing the trends of cord-cutting and unbundling traditional television services.
Avod: AVOD, or Advertising-Based Video On Demand, refers to a streaming model where content is offered for free to viewers but is supported by advertisements. This model allows platforms to attract a large audience without subscription fees, generating revenue through ad placements. AVOD plays a significant role in the evolution of digital distribution and licensing, as it democratizes access to content while enabling advertisers to reach specific demographics.
Broadcast ratings: Broadcast ratings are a measurement system used to determine the popularity and viewership of television programs. These ratings reflect the number of viewers who watch a specific program and help networks and advertisers understand audience preferences, ultimately influencing programming decisions and advertising rates. As viewers increasingly shift from traditional cable services to alternative viewing options, the impact of broadcast ratings on the industry has been profoundly affected.
Cable network adaptations: Cable network adaptations refer to the process of transforming content from other media forms, like books, movies, or web series, into television shows specifically designed for cable television networks. This trend has gained momentum as networks seek to attract viewers by leveraging established stories and characters, providing a sense of familiarity while also adapting narratives to fit serialized formats that resonate with audiences.
Content libraries: Content libraries are centralized repositories that store and organize various media assets, such as films, TV shows, and other digital content, for distribution and access. These libraries play a crucial role in the shift towards streaming services, allowing viewers to choose what they want to watch without being tied to traditional cable packages.
Convergence culture: Convergence culture refers to the merging of traditional media and digital platforms, where content flows across multiple media channels, and audiences participate in the production and distribution of media. It emphasizes the active role of consumers as they engage with and influence media narratives, blurring the lines between producers and consumers. This shift allows for new forms of storytelling and interaction, fundamentally changing how content is consumed and created.
Cord-cutting: Cord-cutting refers to the practice of canceling traditional cable or satellite television subscriptions in favor of streaming services and online content delivery. This trend has transformed how audiences consume media, pushing the entertainment industry to adapt its distribution strategies and reevaluate audience measurement techniques.
Cultural Imperialism: Cultural imperialism refers to the process by which a dominant culture imposes its values, beliefs, and practices on other cultures, often leading to the marginalization or erasure of local cultures. This phenomenon is particularly evident in the global media landscape, where powerful nations export their cultural products, influencing international perceptions and identities.
Disruption: Disruption refers to a significant change that challenges existing systems, practices, or markets, often resulting in the emergence of new technologies or business models. This term is especially relevant in the context of media consumption and distribution, as it highlights how traditional structures are being reshaped by advancements in technology and shifts in consumer behavior, leading to new forms of engagement and access to content.
Geo-blocking: Geo-blocking is a technology that restricts access to internet content based on the user's geographical location. This practice is commonly employed by streaming services and digital content distributors to comply with licensing agreements and regional regulations, often resulting in different content availability across countries. It plays a significant role in shaping digital distribution and the changing landscape of media consumption, especially as viewers increasingly seek alternative access methods.
Hulu: Hulu is a subscription-based streaming service that offers a wide variety of TV shows, movies, and original content for viewers. It has gained prominence as a significant player among streaming platforms, facilitating access to digital media while also navigating the complex landscape of digital distribution and licensing agreements. Hulu's model has contributed to trends like cord-cutting and unbundling, reshaping how audiences consume content in an era marked by rapid technological advancements.
Linear Television: Linear television refers to a traditional broadcasting model where programs are scheduled to air at specific times, and viewers watch them in real-time as they are broadcasted. This model emphasizes a sequential viewing experience, often relying on scheduled programming and advertisements, contrasting with on-demand viewing options available in today’s media landscape.
Millennial audiences: Millennial audiences refer to the demographic cohort born between 1981 and 1996, characterized by their unique media consumption habits and cultural preferences. This group has grown up during a time of rapid technological advancement, influencing their viewing behaviors, such as a strong preference for digital platforms and a desire for on-demand content. Their engagement with television and media reflects broader societal shifts, including the move towards cord-cutting and unbundling traditional media packages.
Net neutrality: Net neutrality is the principle that Internet service providers (ISPs) must treat all data on the Internet equally, without discriminating or charging differently by user, content, website, platform, application, or method of communication. This concept is crucial because it ensures a level playing field for all online services, influencing how content is accessed and distributed in a digital environment where online streaming and digital distribution thrive.
Netflix: Netflix is a streaming service that provides on-demand access to a vast library of films, television shows, documentaries, and original programming. It revolutionized how audiences consume media by moving away from traditional broadcasting and cable TV, offering flexibility and convenience through online streaming. This shift has played a significant role in reshaping the media landscape, influencing digital distribution practices and consumer viewing habits.
Skinny bundles: Skinny bundles are subscription packages offered by streaming services that include a limited selection of channels, primarily focusing on core content without the extensive channel lineups typical of traditional cable packages. These bundles cater to viewers who prefer specific channels and want to avoid paying for unnecessary content, making them an attractive option for cord-cutters seeking more affordable alternatives to cable TV.
Subscription model: The subscription model is a business strategy where customers pay a recurring fee to access a product or service over time, rather than making a one-time purchase. This model has gained popularity in various industries, especially in media and entertainment, as it provides consumers with a steady stream of content while ensuring a reliable revenue stream for providers. As platforms move from traditional purchasing to this model, it shapes how audiences consume content and influences market dynamics.
Svod: SVOD, or Subscription Video on Demand, refers to a streaming service model where users pay a subscription fee to access a library of video content at their convenience. This model has become increasingly popular as it allows viewers to watch movies and TV shows whenever they want, without the restrictions of traditional broadcast schedules. It is closely tied to the changes in how content is distributed and consumed, enabling a shift from cable subscriptions to on-demand viewing experiences.
TVOD: Transactional Video on Demand (TVOD) refers to a digital distribution model where viewers pay to access individual pieces of content, such as movies or episodes of a series, on a one-time basis. This model allows consumers to choose specific titles without the commitment of a subscription, thus providing flexibility and control over their viewing choices. TVOD fits into the broader landscape of digital distribution and licensing, enabling rights holders to monetize their content directly. It also plays a role in the shifting dynamics of media consumption, particularly with the rise of cord-cutting and unbundling services.
Unbundling: Unbundling refers to the process of separating services or products that were previously offered together, allowing consumers to purchase only what they want. This shift is largely driven by technological advancements and changing consumer preferences, particularly in the media and telecommunications sectors. Unbundling challenges traditional subscription models and promotes a more personalized consumption experience.
Viewership patterns: Viewership patterns refer to the habits and trends of audiences in consuming television content, including when, how, and where they watch shows. These patterns help to understand the dynamics of audience engagement and influence programming decisions, advertising strategies, and overall media consumption. Recognizing how viewers interact with content can inform decisions about ensemble casts, the impact of cord-cutting, and the global reach of transnational audiences.
VMVPDS: VMVPDS stands for Video Multi-Viewpoint Production and Distribution System. It's a framework that supports the creation and distribution of video content from multiple viewpoints, often utilizing various technologies to enhance viewer engagement. This system plays a crucial role in how content is consumed, especially as audiences shift away from traditional cable services, leading to the rise of new consumption patterns.