The End of Free TV
With all this talk about the cord-cutting masses no longer wanting to subsidize TV channels they don't watch, it's a little surprising that one of the oldest, most widely available forms of TV is waning: over-the-air broadcast TV.
With all this talk about the cord-cutting masses no longer wanting to subsidize TV channels they don't watch, it's a little surprising that one of the oldest, most widely available forms of TV is waning: over-the-air broadcast TV. Despite its attractive price of $0 per month and billions of advertising revenue, nobody — including the broadcast networks, the tech companies that are out to disrupt them, and the cord-cutters and cord-nevers who hate cable — is very enthusiastic about antennas. Rather, this is the "zero tv" generation, according to a recent Nielsen study, which found that 5 million households have no television at all and would rather pay for Internet distribution than put a set of bunny ears on a TV set. Aereo, the Barry Diller-backed tech startup, is betting people would rather pay $80 per year (i.e. about what it costs to get a HD tuner for your PC) to deliver this gratis content over the Internet rather than over the air. So enraged at Aereo's elaborate plans of thousands of tiny antennas sucking their signals onto web servers, Reuters reported on Sunday that the Big Four broadcast networks are considering ending over-the-air transmission to foil the service. On Monday, News Corp. chief operating office Chase Carey said the company would turn Fox into a cable channel if the courts allow Aereo to sell their service: “This is not an ideal path we look to pursue, but we can’t sit idly by and let an entity steal our signal. We will move to a subscription model if that’s our only recourse.”
The networks haven't really been excited about free television anymore for a while and for obvious reasons: they don't want to give their product away for free. (Duh.) The big broadcasters engaged in regular wars with cable companies to get them to pay transmission fees just like they do for their cable-only channels like ESPN and Comedy Central. And really, over-the-air TV is a sliver of the market. Though there have been nervousness about the future of TV, pay TV penetration is still around 90 percent.
That's the reason that all the big networks got together to sue Aereo in the first place: They don't want to lose the fees they've come accustomed to being paid. While News Corp.'s threat to stop broadcasting is more likely big talk than an actual game plan, Wall Street likes that idea. News Corp.'s announcement sent its stock soaring, even though it would have to wait until after its current NFL deals, which run for another seven years, expire.
But look around and content owners have already started pulling their best, most valuable stuff from the public waves. Sports, for example, have started moving to pay TV. Most regular season baseball, basketball, and hockey games now run on regional sports cable stations. While the really big sport events are still broadcast, that's showing signs of slipping, too. Starting in 2014 h the Final Four of the NCAA Tournament will be on TBS. That would follow Monday Night Football, the staple of ABC for decades, that moved moved to ESPN, and even the Olympics, which, aside from the primetime packages, was shown live (whether on cable stations or streamed online) only to people who pay for their TV. Again, these are all things we used to be able to get for free through other means. As sports rights come up for bid, more and more it's flush cable companies who can outbid the broadcasters. After all, live sports is one of the main reasons people cite for not cutting the cord. Of course, the hefty bill for sports, as I have calculated before, is one of the main reasons non-sports fans most want to buy a la carte.
This movement of must-see programming from broadcast to cable might help explain why the people haven't flocked to free television: The best stuff isn't really on there anymore. Either by design, as explained above, or because of our expensive cable packages—The Atlantic's Derek Thomspon theorizes that high cable prices have resulted in better shows—cable and premium channels offer better stuff. NBC, once an incubator of Must See TV is going through an existential crisis, as The Atlantic Wire's Richard Lawson has explained. "The glory days are past," he definitively wrote. This is partly because broadcast networks are in the business of quantity versus quality. Besides for transmission fees, they make money off of advertising. Much like the Internet business, its a dollars for eyeballs proposition, which has led to an overall decline in quality. Plus, cable companies (because of our exorbitant cable packages!) have a lot of money to pay channels to make great stuff.
All of this is alarming. People should be alarmed. A public good is slowly eroding right before our eyes. And yet, consumers don't seem to care. Maybe it's because there is not much to be done? Cable companies have created such a stranglehold over the market, if we want certain shows, we have to pay for a lot of nothing in our cable bills. If not, we can pay for content through Netflix or Hulu. This is the beginning of the end of free TV.