First HBO, Then CBS: The Cable Bundle Is Slowly Coming Apart

Yesterday, HBO announced a new Internet streaming service for 2015 that will let you watch shows without a cable subscription.

Today, CBS announced a new Internet streaming service that will let you watch shows (not including the NFL) without a cable subscription.

In less than a day, the most critically acclaimed network and the most watched network bet on the future of Internet TV. And just like that, the cable bundle has unraveled more in the last 24 hours than in the previous 24 months.

HBO and CBS à la carte won't blow up cable. The vast majority of older households adores pay-TV and spends four to five hours a day glued to the couch. Many families won’t want to replace a technology they know and love with a mess of streaming options they have to learn.

But younger Americans are different. They grew up with that mess of options. They love that mess of options. They actually find a mess of options easier to deal with than a cable box and a Comcast representative.

According to comScore, 24 percent of 18-to-34-year-olds don’t subscribe to pay TV. (That’s split evenly between cord-cutters—those who dropped cable—and those who never bought cable.) The pay-TV business hopes this group will sign up for cable when they get older, get married, and have kids. You can see, in the graph below, that the market for pay-TV subscribers is already overrepresented by older households (in green).

The TV Market Is Shifting Toward the Cord-Cutters

TV without cable is just getting too good. Netflix, Hulu, Amazon Prime, CBS streaming, and HBO Go-It-Alone make it tantalizing thinkable to be a television fanatic without actually paying for what we’ve historically considered “television.”

The mess of streaming options–the “mini-bundle,” or TV à la carte–might not be a better economic deal, if you think about the total value of the cable bundle. But economics is an overrated element of consumer psychology. Families don’t make decisions about entertainment by calculating the cost-per-attention-hour of their leisure time. They ask themselves simpler questions, like: “If I want to watch my favorite new TV shows—Orange Is the New Black, Game of Thrones, The Good Wife, and The Big Bang Theory—do I need the cable bundle?”

Two days ago, the answer to that question was: Yes, you need to buy the whole fruit basket. Today, the answer is: No, you can buy those channels like you can buy an apple, orange, and banana at any grocery store.

The fact that great live TV and cable are no longer synonymous makes it all but certain that more young consumers will stay off the bundle forever. It won’t kill cable overnight. Instead, it will accelerate the aging of pay-TV's business. When it comes to subscribers to the old-fashioned bundle, it is quite likely that we have officially hit Peak Cable.