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Who Killed the Great American Cable-TV Bundle?
The reason American consumers are abandoning their cable subscriptions is not a mystery: It’s expensive, and cheaper online alternatives are everywhere. But who exactly is responsible for the slow demise of the original way Americans paid for television? That’s a far trickier question. The answer can be traced to a few decisions in recent years that have set the stage for this extraordinarily lucrative and long-lived business model to unravel: licensing reruns to Netflix Inc., shelling out billions for sports rights, introducing slimmer bundles, and failing to promote a Netflix killer called TV Everywhere.

The TV bundle with hundreds of channels, which took off in the 1990s and was ubiquitous in U.S. homes at the start of this century, has fallen from 100 million to 95 million subscribers in the past five years. This quarter, pay-TV giants such as Comcast, Charter, Dish, and AT&T saw an additional 744,000 subscribers disappear.

Peak TV

The number of traditional TV subscribers has been in steady decline since 2012

This steady decline is the driving force behind a series of blockbuster mergers reshaping the media landscape, such as  AT&T buying Time Warner, Walt Disney acquiring much of Fox, and Comcast pursuing Sky. Entertainment companies, nervously watching their business model waste away like a slowly melting glacier, are deciding they need to get larger and expand globally to compete with deep-pocketed rivals like Netflix—or sell.

The TV industry isn’t suffering financially, however, because it keeps raising prices on the remaining customers. The average pay-TV customer today spends $106.20 a month, up 44 percent from 2011, according to Leichtman Research Group. Since 1980 cable, satellite, and phone companies have generated $1.8 trillion in revenue from selling TV service, according to Kagan, a unit of S&P Global Market Intelligence. Revenue last year was $116 billion.

But many believe a reckoning for the cable bundle has arrived.

“You’ve got high prices, big bundles, and broadband,” said Warren Schlichting, group president of Sling TV, which has more than 2 million people paying for an online service that starts at $25 and offers about 30 channels. “At some stage, the consumer is going to revolt.”
We interviewed about 20 current and former industry executives and analysts to understand why traditional television has started losing its foothold in America’s living rooms. Some blamed their peers for decisions that made cable too pricey or opened the door to online competition, and many declined to be identified for fear of angering business associates. In reality, almost everyone played a role in jeopardizing the business.

“Everyone has a piece in this story,” one media executive told me. “It’s like Murder on the Orient Express. All 17 players stabbed the person.”

Great article.

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