TV used to be the winner in the media business. Already in the 1970s it grew into the most popular category of media measured by how much time was spent on it. Then, in the 2000s, when the print media business started to decline and free-to-air TV reached maturity, pay-TV was the part of media business that grew fast.
The growth of pay-TV was one of the main reasons, why the 2000s are called the golden era of TV content, especially quality series and TV sports. TV seemed to be able to adapt to Internet challenges and have a long prime time ahead.
Even as late as 2013, the leading TV consumer data intelligence company Nielsen commented in its quarterly media audience report, how successfully TV had succeeded in retain stable viewership.
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But during the last two years, the situation has changed rapidly. The following Figure shows the development of average TV watching time of US population (source: Nielsen Total Audience Reports). The Figure presents moving 12 month averages.
As the Figure shows, TV watching has declined fast and withe even accelerating speed among the youngest age groups. The yearly decline is in the range of 15%. Nielsen report tells that the time spent on using smartphones has grown in the same pace. The development in other markets like in Finland is similar, even though the USA is leading the development.
According to Nielsen’s latest (Q1/2015) audience report, 80 percent of US population between 18 and 34 are reached weekly through their smartphones, whereas TV reaches only 76 percent of them. In the amount of minutes used with different devices, TV still leads, but in the ages between 18 and 34 the time spent using digital devices is almost as long as watching TV.
No more national experiences
During the heyday of free-to-watch TV, there were few nationwide TV channels. A popular show during prime time could reach over third of the population. This meant they were shared national experiences.
Also this situation has changed during the 2000s. The cost of delivering one TV channel has declined in orders of magnitude. Modern technologies allow delivery of tens of channels over the air, and over half of the population in industrialized countries is reached through cable, which can deliver hundreds of channels.
The development has meant that the TV delivery is fragmenting fast. In Finland, in 2002 the four most popular channels had 95% market share. In 2009 their share was 73% and in 2014 only 65%.
From a technical point of view we are living now in heaven. Whenever you open your receiver, you can select from tens of different programs. But as anyone, who has had time to watch through the channels can tell, the amount of original new content is limited. Majority of the content are reruns. Number of delivery channels is not any more a bottleneck.
This situation is clearly evidenced by the penetration rates of pay-TV. In Finland, the rate grew from 4% to 32% in about eight years between 2003 and 2011. After 2011, the penetration has declined. There is sufficient amount of interesting content that the majority of the population is prepared to pay over ten euros a month. The content that makes someone to pay for it is fragmenting to small user segments.
Elimination of non-value adding middlemen
Middlemen that are not adding real value from the point of view of customer will be eliminated, if there is real competition, As delivery of streamed content has become a commodity, there is diminishing business for broadcasters that do not produce their own content.
As the choice of channels to deliver the content to watchers increases, the global players controlling a large portfolio of content like Discovery, HBO and Netflix can reach their audiences globally. Therefore they are increasingly reluctant to let other delivery organizations to send their content. The middlemen between watcher and content producers will lose their position and the value chains will be organized around holders of original content rights. The players will then have better possibilities to flexible monetization models for different types of content and audiences.
In Western European countries, the position of independent traditional networks is further weakened by national broadcasting companies that have resources to produce or purchase their own content. There is also legislation that demand certain sports events of high national interest to be broadcast free of charge. Therefore there is not a good niche available to others to produce commercial local content, especially in smaller markets.
Broadcast TV becomes health care
Still, the future of traditional TV channels is not as poor as with printed media. As can be seen from the Figure above, people over 65 year are still watching TV and will do it also in the future. The importance of retired people as a consumer market is also increasing in general, as their wealth is growing. So they are an attractive target group for traditional TV advertising.
There is also another position opening. Anyone, who has visited elderly care home, knows what the inmates are doing the majority of the time they are awake. They are watching TV. This will continue for at least next 10-20 years.
Currently, TV is the main way to automate elderly care. Therefore it makes sense to move funding of public broadcasting services to be based on taxation. These taxes should be counted as part of national health care costs.