Television and the Winds of Change


TV – As 2014 winds to a close and the next International CES looms large, it’s time to take a look at some of the unprecedented changes that are re-shaping the “business” of television – both in hardware and software.

Throughout 2014, many of the editors at Display Daily have written about market economics and supply chain issues that have driven the prices of televisions down to all-time lows. Over Black Friday weekend, it was commonplace to see 50″ and even one or two 55″ LCD TVs at retail for less than $500. (Some of these were Tier 1 brands.)

Ultra HD TV prices also took a nosedive during the holiday weekend. I spotted a Samsung 55″ Ultra HD set at BJ’s Warehouse for $899 (and a few friends of mine snatched ‘em up). Vizio’s price-busting P-series Ultra HD sets contributed to the fun, with a 65″ model offered for just under $1500 with accessory sound bar.

For the past few years, the over/under on 1080p TVs was 60″ for about $1,000. Now, that floor has collapsed. There were numerous 55″, 60″, and 65″ 2k sets well below the $1K mark. And accessories have also seen huge price cuts. A Samsung “smart” Blu-ray player with built-in Wi-Fi connectivity was offered for less than $60 – about 1/3 of what it would have cost five years ago.

On the software side, Netflix continues to pick up subscribers, topping 37 million in the United States and 50 million worldwide. The US subscriber base nearly equals the total subscribers of Comcast and Time Warner Cable combined, which may be one reason why they’re trying to merge operations.

Now, The Nielsen Company tells us in a new report that more and more people across ALL age groups are turning to non-traditional viewing of video. According to its latest Total Audience Report“…the amount of time spent watching video on computers and smartphones each day among those age 55 and up increased 55% in the third quarter, compared with the same quarter last year”.

Nielsen also found that among the 18-49 years old key demographic, conventional TV viewing dropped 3% YoY with digital streaming and downloads increasing by 35% over the same time period. In the 25-64 years old group, the comparable numbers were 2% and 62% Y-Y, respectively.

Time-shifted viewing using DVRs and video on-demand increased to 14 hours and 20 minutes per month, from 12 hours and 31 minutes a month in 2013. Internet video viewing saw an increase to 10 hours and 42 minutes per month, an increase of 40% over the previous year.

It should be no surprise then that fast internet connections are increasingly valued more than conventional pay television packages. According to a study just completed by Seattle, WA-based mobile advertising company Marchex, 26% of new cable TV customers want broadband service only (22% asked for TV service only).

Marchex’s research revealed that 40% of respondents contacted their service provider to ask about buying specific channels individually, with HBO, Showtime and Starz in the top slot. Polling cord cutters, 84% of them said they were “somewhat happy with their decision” while 37% stated they had no interest in returning to a conventional pay TV subscription.

Going back to the Nielsen report, we find that about 2.6 million households are now “broadband only,” meaning they don’t subscribe to cable or pick up a broadcast signal. This number amounts about 2.8% of total US households and is more than double the 1.1% of households that were broadband only last year.

To cap everything off, CBS top honcho Les Moonves was quoted at a recent UBS Global Media Conference in New York as saying the amount of money that some broadcast TV stations licenses might fetch in next year’s FCC spectrum auction could “…present a very great opportunity for us…We own 27 television stations…when you see the numbers being thrown out there for the spectrum of a local television station – in the $200-million range – suddenly that looks pretty attractive…” Similar sentiments were expressed by 21st Century Fox co-chief operating officer James Murdoch.

There’s no question that the world of television is in turmoil. Sales of new 1080p TVs continue to decline although Ultra HD set sales are encouraging so far. Prices are plummeting as more manufacturing shifts to China and Japanese brands continue struggling with profitability. (Don’t be surprised to see an increasing emphasis on small appliances and white goods in many Tier 1 CES booths next month!)

On the software side, we have former subscription-only premium TV channels HBO and Showtime launching streaming services next year. Netflix continues to pick up subscribers and pay TV companies will see a small but significant net loss in subscribers when the numbers for 2014 are tallied up.

And even though the next-generation specs for 4k Blu-ray will be announced later next year, it’s probably too late – viewers clearly prefer streaming and digital downloads. Netflix’s first out-of-the-gate 4k streaming service (now followed by Amazon) will hasten the ongoing decline in optical disc rentals and sales. The widespread adoption of H.265 video coding will only speed up this process.

Feel that breeze? It’s getting stronger… – Pete Putman