What's More Likely to Kill Cable: Netflix or Vine?

The crazy-profitable TV business isn't just being undercut by smaller bundles, like Netflix and Apple TV, but also by entertainment that isn't really TV, like YouTube and Vine.

Alexandre Meneghini/Reuters

Television used to be simple. Maybe it didn't feel that way when you hit the Menu button and unraveled a list of several hundred channels. But at least people agreed on the first step: Buy the cable bundle (and then suffer through the user interface).

But soon consumers will suffer a dizzying decision before they touch the remote. As the big bundle has gotten more expensive in a period of stagnating median income, several networks, like HBO and CBS, have pledged to offer their shows à la carte. At least six companies offer or will soon offer smaller bundles of shows, like Netflix and Apple. Just figuring out what company should package and sell you an infinity of video entertainment is becoming its own paradox of choice.

This is not the death of cable bundles. All the above choices are smaller bundles of shows and networks that you can otherwise find on "cable." But it is, perhaps, the peak of the Big Bundle. And the shift is happening faster than many people (including me) predicted.

I've written about the economics of television a lot, and each article typically walks through several layers of the TV ecosystem. I'll explain that channels are really bundles of shows, and sports is holding everything together, and advertising is an overrated contributor to cable revenues.

But, at least for this piece, I'm working from a new premise: Nobody cares about any of that. Consumers don't care about the economics of television. They don't care that the golden age of TV entertainment is a direct result of TV's weird quilt of cross-subsidies. What they care about is simple. It's convenience and cost.

So which of these bundles will be the final unraveling of the big bundle? All of them and none of them. All of them, because the sum of these smaller bundles will pull more young people away from the big bundle or at least encourage them to default to their particular status quo, whether that's Netflix, Amazon, or anything with an Apple logo.

But also, none of them, because the real disruption isn't coming from a repackaging of bundles, but rather from the mess of video and visual entertainment that nobody really considers television, but still competes cheaply for the scarce attention of young people: Vine, YouTube, Instagram, and Facebook. In the words of the media research firm MoffettNathanson, the mini-bundles proposed by Apple and Sling are...

... simply re-aggregations of traditional cable and broadcast networks. Our sense remains that we are still looking in the wrong place for disruption. The real revolution is likely to come from outside the traditional ecosystem, from the Vimeos and Vessels and even Facebooks of the world, where content is being created and distributed entirely outside the existing ecosystem, often at a fraction of the cost of traditional linear TV. Our suspicion is that the millennial cord cutter isn’t waiting around for just the right package of cable channels that only their parents watch.

Oh, snap. And also: pretty much. Disney and Comcast aren't just chasing Netflix, which is some great original shows alongside a beautifully rendered platter of TV's re-heated leftovers. They're also chasing the flatlining income of the typical young household. They're chasing Vine Stars, with follower counts three-times larger than Mad Men's viewership. They're chasing cost and convenience in a Millennial demographic where only half of young people say they are paying for TV but just about all of them spend hours a day looking at news feeds.

Extrapolating the present isn't the same as predicting the future, and many TV people have good reason to think this will work itself out in their favor. The familiar line from the TV executives I've spoken with is that the Millennial problem isn't really about technology. It's about age and income. That is, when young people get hitched and richer, they'll pool two incomes and splurge for cable just like every generation before them. These executives might be right. But they are pattern-matching to past generations who had no Vine, no Twitter, no Instagram, no YouTube, no Facebook, no Vimeo ... no video entertainment that didn't come through a TV screen or via a movie ticket. It's not clear that the behavior of adults born in 1946 is the right way to predict the entertainment future of adults born in 1996.

So the most important question isn't how many people sign up for smaller bundles instead of the big bundle, although that will be an interesting thing to follow. Rather, it's how many young people sign up for any bundle rather than embrace the chaos of entertainment on free apps. TV is still a paradox of choice. And "none of the above" will always be an option.