Cord cutting — the term for TV customers abandoning pay TV services — continues to impact the TV industry.
From April to June of this year, more than 800,000 subscribers canceled their traditional television plans — whether from cable companies, satellite providers or telephone companies. That’s the most people who have ever cut the cord in one financial quarter, and it’s also a big explanation for the consistent, industry-wide drop in television viewership.
The MTV Video Music Awards are usually a decent draw, and this year featured performances by Beyoncé and Rhianna, but the audience for the Aug. 25 show dropped 34% from last year. But there is a bright spot for Viacom: the digital streaming audience for the event increased by 70% from last year.
Meg James is a media reporter for the Los Angeles Times, and she joined senior producer Oscar Garza on The Frame to make sense of this cord cutting mess — how it's changing the relationship between networks and advertisers, and why streaming still plays second fiddle to traditional broadcasts.
This is somewhat astounding: from April to June of this year, the second quarter, more than 800,000 people canceled their pay TV subscriptions. In your story, you quoted an analyst from the industry consulting firm that comes up with these numbers. How did he assess those numbers?
SNL Kagan, which is a very prominent consulting firm that monitors the media industry, [has] been tracking homes with pay-TV for more than a decade, and they've noticed a sharp uptick in the number of subscribers who are dropping their subscriptions. The second quarter of this year has been the biggest drop that they've recorded since they started this service more than a decade ago.
Those numbers would at least partially explain the drop in ratings for the Olympics, for example, and also the dramatic drop the ratings for the MTV Video Music Awards. How are the broadcast and cable networks responding to this new reality?
I wouldn't say they're panicked, but they're very concerned. As you saw, the ratings were down about 20% for the Olympics, and that caught NBC by surprise. The numbers for the VMAs were also way down, and I think it shows that people are watching TV differently than they were just two or three years ago. Companies are trying to figure out how to respond to these changes.
In fact, both NBC and Viacom are touting the huge growth of audiences who are watching live streams on their computers. How do networks sell spots to advertisers for these live events, now that they're almost guaranteed to make a bigger impact on streaming than they used to, as opposed to television?
Well, the networks are trying to sell ads the old-fashioned way, with 30-second spots. They're also sort of rejiggering commercial breaks, and that's one of the criticisms that NBC faced [during the Rio Olympics], that they had bunched up the ads in more rapid breaks. People felt like, Oh my gosh, we're seeing so many more commercials.
It was interesting because there was a study released that said there were about the same number of commercials for the Olympics in 2012 as there were this year, but people felt that there were so many more. I think a lot of people are used to new technology now — they have DVRs, they're fast-forwarding through ads, and this is really becoming an issue for the media companies.
They're [also] trying to sell ads and impressions on the video sites, but the revenue they're bringing in from their digital offerings is far less than what they traditionally have brought in from their regular TV channels.
But if you're streaming a live event on your computer, aren't you essentially watching the broadcast? Or do they package those differently?
Yes and no. Most times, they package them a little bit differently, but it's been sort of a push-pull among the television networks and advertisers. One reason why is because advertisers are used to paying less for digital ads than they are on TV, and so they want to pay less for the eyeballs on the digital stream.
Also, it's easier to divert your attention when you're watching online during a commercial break. It's always been known that people didn't watch all the commercials on TV, but you didn't have the level of data that you do right now, which really shows the ad avoidance.
If the trend toward social media buzz and streaming continues, and of course there's no sign that it won't continue, are the networks able to see the point at which digital streaming advertising will overtake broadcast advertising?
If they have, they haven't publicly said that. I think it's probably a little too soon — even though NBC had huge, huge numbers for their streaming audience, they still had something like an average of 25 million viewers a night watching the tape delay broadcast of the events from Rio. That's a huge audience, and they're rightly trying to hold on to that old way of making money, because it's been far more lucrative.