Business Update with Mark Lacter

Lacter: slow growth in the pay-TV business

KPCC's business analyst Mark Lacter says growth in the pay-TV business is slowing.

Shirley Jahad: Mark, what gives?

Mark Lacter: What gives, Shirley, is that many of us already have a cable and satellite hookup, so that business is maturing.  And it has been for some time - the latest numbers from the research firm SNL Kagan show that the number of cable subscribers actually fell by a million or so in 2012 (cable pretty much peaked 10 years ago).  Meantime, the telecom services like Verizon and AT&T gained a little ground from a year earlier.  All told, pay-TV operators added about 50,000 customers in 2012, which is basically flat growth in an industry that has 100 million households.

Jahad: How's network TV faring?

Lacter: It's also slowing down, especially among viewers from ages 18 to 49, which is the main demographic that advertisers care about.  Through last week, Fox was down 23 percent this season, NBC down 7 percent, CBS 3 percent, and ABC 8 percent.  Now, there are all sorts of explanations for the drop-off - they range from the increased use of digital video recorders, or DVRs (those don't get included in the main ratings numbers).  Also, the huge growth of online streaming services like Netflix and Amazon allow viewers to circumvent pay-TV.  There's a survey out that has 17 percent of TV watchers saying they would be willing to cut the pay-TV cord, though how many of them would actually do it is a debatable point (someone said that cord-cutting was a little like wanting to be a vegan - it sounds like a nice idea until you realize how impractical it is).

Jahad: I suppose sports programming is an area where pay-TV has a leg up.

Lacter: Yes, and that’s especially true in L.A. because of the new Lakers channel from Time  Warner Cable, as well as the Dodgers channel, which is being planned for the  2014 season.  So, the question is not so much whether people will hold onto cable and satellite, but what will they be watching on cable and satellite.  And that explains why we’re seeing so many non-network channels offering original series.  It's not just the obvious names like AMC and Bravo - it's FX and Oxygen and the Hallmark Channel and the History Channel.  They all want to somehow stand out among viewers in order to ensure that the pay-TV companies keep them on the schedule.  All told, it's a crazy time for all facets of the TV business.

Jahad: There also are changes in the way creative content is being financed.

Lacter: Small-scale content, Shirley.  Here's an example of how the online world has changed both the media and philanthropic landscape, and a lot of it is being played out in L.A.  You might be familiar with Kickstarter - it's the online fundraising site that allows people to help finance a creative project of some kind.  It could be a movie or a videogame or an album.  There's usually no payback on your investment, except maybe a t-shirt or DVD.  But, it's become a new kind of philanthropy, especially among people in their 20s and 30s who find the concept compelling because it provides a measurable return as opposed to contributing to some huge organization and seeing their money disappear into a black hole.

Jahad: You can't go to Facebook without seeing someone with a Kickstarter campaign.

Lacter: Well, it turns out that 122 projects were financed in L.A. last year (only New York had more).  The local activity is not surprising, given that film and video is the most popular category among those asking for money, and the second-most popular among those giving out money.  Actually, this isn't all that different from when a musician or filmmaker asked his friends or family for support - except that they're able to do it on a much larger scale and attract perfect strangers.

Jahad: Any standouts?

Lacter: Well, earlier this month the producers of the TV series "Veronica Mars" went on Kickstarter to ask for funding to produce a movie version.  Within 12 hours, they received more than $2 million.  It’s just among the many projects receiving support that a few years ago would have gone nowhere.

Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


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