Netflix recently reached a major milestone: it now, according to PricewaterhouseCoopers, has the same number of paying subscribers in the U.S. as all cable TV companies combined.
For years, the TV industry was insulated from the disrupting effects of the internet, the very disrupting effects that decimated both the music and newspaper industries. One reason for this was that, for the longest time, nothing on the internet could match the richness and scale of a television commercial. There was just no equivalent to running a 30-second commercial in front of 18 million people watching The Big Bang Theory.
Also, television content is prohibitively expensive to produce. The economics of the internet just did not allow for the spending of up to $1 million per episode that’s common for prestige TV. So the cable bundle prevailed and TV advertising remained high.
[LIKE THIS ARTICLE SO FAR? THEN YOU’LL REALLY WANT TO SIGN UP FOR MY NEWSLETTER. IT’S DELIVERED ONCE A WEEK AND PACKED WITH MY TECH AND MEDIA ANALYSIS, STUFF YOU WON’T FIND ANYWHERE ELSE ON THE WEB. SUBSCRIBE OVER HERE]
Netflix, arguably, was the first OTT company that had the scale and was deep pocketed enough to produce this kind of content and make it economically viable. Its foray into original programming, an investment that which will reach $8 billion next year, likely accelerated the cord cutting trend, and this news that it’s now break-even with cable TV will likely be viewed as the tipping point that signaled the end of traditional TV, and the industry is about to experience the kind of turmoil that music and newspapers saw in the 2000s.
But there might be some irony here: I can’t help but wonder if Netflix’s disruption of the TV is at least partially responsible for the success newspapers and the music industry have had in getting users, especially Millennials, to actually pay for their content.
One could argue, for instance, that Netflix represents the first instance that many Millennials have of paying for internet content. Before, they had been living in a world in which all internet content was perceived as being free, and Netflix ascribed value to digital content in a way that no other media company had. It essentially trained users to view content as having monetary worth.
Also, and perhaps more important, cutting the cable cord just frees up a lot of capital that can be spent on other things. The average cable subscription costs $99 a month. The average Netflix subscription (and most other streaming services) is only $10. That means a cord-cutter suddenly finds themselves with almost $90 in savings, and the increasing success of payment models at places like the Washington Post, New York Times, and Spotify might be the result of people reallocating their savings from cord cutting into other types of content.
Of course, I don’t actually have any evidence to back this up, but it’s an interesting thought experiment.
Did you like this article? Do you want me to create awesome content like this for you? Go here to learn how you can hire me.