Is Netflix Killing Cable TV?

NEXT MONTH the Emmy Awards, the awards for American television, could label a show that has never appeared on a television channel as the best drama of the year. “House of Cards,” a political maneuvering series starring actor Kevin Spacey (photo), is only available on Netflix, an online video service. The show’s success highlights the maturation of video streaming companies and the threat they pose to mainstream television. People can now watch TV-quality shows, including “House of Cards,” only through Netflix, apparently reducing the need to pay for a cable subscription. Is Netflix Killing Cable TV?

Online video services have long been touted as the destroyers of pay television. Fewer and fewer people are thought to pay for cable, it is believed, when they can stream their favorite shows through Netflix and other online video services, including Amazon and Hulu. Netflix and its peers are convenient: subscribers can watch programs whenever they want, and can watch programs outside of their homes on their mobile devices and tablets (as long as they have an Internet connection), freeing them from their TV. These services are also cheaper: US cable subscribers pay around $ 80 for a subscription per month (excluding broadband); Netflix costs around $ 10. Netflix now has around 30 million members in America and 38 million worldwide.

Many predicted that Netflix would kill pay TV just as murders happen in popular cable dramas – suddenly, painfully, and quickly. So far, however, the death of pay television has not happened so quickly or dramatically. The main reason for this is that content producers and pay TV operators have a habit of ensuring that consumers cannot watch current episodes of their popular shows unless they pay for cable. In other words, they haven’t made the same mistake the newspapers made a decade ago, offering the same content online for free that they expect subscribers to pay for. Content owners have restricted Netflix’s ability to purchase the rights to the shows until they air on TV. And anyone who wants to watch sports live still needs a subscription, since Netflix hasn’t purchased expensive sports rights. Netflix may have had success with “House of Cards,” but most of the hit dramas are still on mainstream television.

In the short term, Netflix hasn’t come close to killing cable. Those who predicted a dramatic death are more likely to witness a prolonged decline. Industry analyst Craig Moffett estimates that about 900,000 American households have cut the cord in the past year or started a new household without signing up for pay television. This represents only about 1% of households subscribing to cable television. But it is significant, because it is likely to accelerate over time. Cord nevers, young people who create their own homes without a subscription, and who may never have one, will continue to increase the number of cable defectors. The same is true of Internet-connected “smart TV” ownership trends: people may be more likely to refuse to pay for cable when they can easily stream Netflix in their living rooms.