Chicago Tribune: Netflix and the making of a TV cord cutter

JAN. 23, 2016 — Maybe you’ve binge-watched the popular TV mini-series “Making a Murderer.” If not, don’t worry, no spoilers here. Just a suggestion: Try out this compelling crime documentary, but know where to find it. The show’s on Netflix.

A bunch of the most talked-about television programs aren’t on traditional TV networks or cable channels, they’re on Internet streaming services. “Orange is the New Black” and “Narcos” are on Netflix. “Transparent” and “Mozart in the Jungle” are on Amazon. Hulu has original programs but also has a vast library of great shows from other networks, ranging from “It’s Always Sunny in Philadelphia” to “Seinfeld” repeats.

In other words, couch potatoes, this is a golden age for television viewing in which you don’t need a couch … or a television. You can watch anytime, anywhere on your laptop, smartphone or tablet.

The phrase of the decade to describe the economic and cultural shifts brought on by digital technology is “disruption.” It’s a marvel to contemplate: how Uber upended the taxi industry, websites challenged the news business, wine apps disrupted sommeliers (it’s true, your smartphone is ready to recommend a nice shiraz). Now it’s television’s turn.

The TV revolution isn’t a sudden phenomenon. It’s been 30 years since there were just three national TV networks, and as channels proliferate the quality of shows keeps improving. But we’re on the cusp of a huge change, in which viewers realize they don’t need to pay a big monthly bill for cable’s hundreds of channels: They can cut the cord and piece together their own Internet-based collections of subscription programming.

Last year, 17.1 percent of U.S. households didn’t pay for traditional TV — they either cut the cord or never had one. That number will jump to 22.6 percent of households by 2019, according to a forecast by eMarketer. The trend is especially pronounced among tech-savvy millennials. A Pew Research Center survey says 19 percent of 18- to 29-year-olds are cord cutters (they dropped cable or satellite TV subscriptions), while another 16 percent have never had a traditional pay TV package.

Consider the cultural shift involved: Once most adults aspired to owning a big-screen TV. Visit young people today and you may search in vain for that oversized TV in the living room. Thinking of one couple we know, you’ll find a husband and wife sitting together on the couch, each plugged into a separate portable device, watching something different.

The first big acknowledgment of the change came last summer when Walt Disney Co. warned that its cable channels, including ESPN, were losing subscribers. Media stocks tanked, wiping out nearly $50 billion in market value in two days. Not everyone suffered. Netflix, worth $44 billion, was the best-performing S&P 500 stock in 2015. The company is growing globally and giving fits to Hollywood competitors, who shake their heads because they know they gave the company its start. (Netflix’s original business was movie rentals.)

It’s an especially topsy-turvy situation because Hollywood is on both sides of this equation. Yes, the TV and cable industries are freaked out by cord-cutting viewers, but the bigger Netflix and other services get, the more money they have to spend on programming … which they acquire from Hollywood studios. “Netflix has been built on the back of great talent from studios like our own,” Fox Television Group Co-Chairman Dana Walden told the Los Angeles Times. “It has helped to reinvigorate fan bases of shows. But from the network side, it’s very challenging.”

Cable still has a strong hold, especially on viewers who want to watch live events like sports and news, and cable channels like the fees they receive from cable providers. But the fragmentation has begun: For example, you can subscribe to HBO via the Internet without having cable service. Other experiments in a la carte pricing, or unbundling, are underway.

The entertainment and cable industries are in a bind. They need to rethink their business models to give consumers even more choices. According to PwC, the average cable subscriber receives 194 channels but regularly watches only 17. So can you blame viewers for cutting the cord?

By Chicago Tribune