A slow and painful demise: Here’s why viewers are turning their backs on cable TV subscriptions!

From the desk of Miles Everson: Hello! Welcome to today’s edition of “Return Driven Strategy (RDS).” I’m excited to share another business insight in this article. For those of you who are not yet familiar with this, RDS is a pyramid-shaped framework with 11 tenets and 3 foundations. When applied properly, these principles help businesses achieve high levels of performance. Let’s apply this framework in the context of a specific industry. Keep reading below to know why demographic shifts and technological advancement can impact an entire industry.

A slow and painful demise: Here’s why viewers are turning their backs on cable TV subscriptions! Cable television was considered as the “undisputed king of home entertainment” for decades. During its heyday, families across the globe never ran out of entertaining content because all they had to do was flick through hundreds of available channels. Fast forward to today, the once-dominant cable television industry is now grappling with declining subscriptions, leading to lower profits. The rise of streaming platforms like Netflix, shifting consumer behaviors, and consumer advancements have all contributed to this steep decline. To know how this happened, we need to take a close look at the industry as a whole. The Golden Age of Cable Television and Its Decline Cable television emerged in the 1950s as a solution to poor broadcast reception in rural areas. In the 1980s, cable had emerged into a cultural staple as it offered viewers a vast array of channels that viewers could choose from. Whether it was news, sports, or entertainment, there was always something to watch for everyone. Due to high consumer demand, the cable television industry saw massive growth, with service providers offering various subscription tiers to customers, ensuring offerings at every price segment. At its peak, the cable television industry had over 100 million subscribers in the U.S. in 2013. Unfortunately, this peak didn’t last for long. In 2023, the number of households paying for cable television plummeted to 58 million, with Statista projecting it to go down further to 53 million in 2024. The reasons for this steep decline? Shifting consumer preferences and technological innovation. Even though the cable television providers enjoyed high demand, that did not mean consumers would remain loyal subscribers. The shift in consumer behavior was powered by technological innovations that started in the mid 2000s. You see, during this time, Internet connectivity improved and became more accessible. This eventually paved the way for the Internet to become a viable method for delivering video content as seen through YouTube’s massive rise to popularity. However, it wasn’t YouTube that led to cable television’s decline… it was the technology behind it: Video streaming. Since Internet speeds enabled viewers to stream videos whenever they want, it was possible to create an on-demand video streaming service. That is exactly what Netflix did in 2007 when it offered on-demand streaming of movies and television shows to its subscribers. Unlike cable television, streaming services provided viewers with the flexibility to watch their favorite piece of content whenever and however they want and at significantly cheaper costs. More importantly, media companies such as ESPN and HBO recognized this change in consumer behavior, so they eventually started their own streaming services, making cable subscriptions less desirable. As years went by and streaming became widely adopted, the subscribers of cable television services started to question the value of these offerings, leading them to end their subscriptions. In response, cable providers like Comcast launched their own streaming services to keep up with consumer preferences. However, they still have to compete with the likes of Netflix, Disney, and HBO. The Death of Cable Television as Seen through RDS Professor Joel Litman and Dr. Mark L. Frigo in the book, “Driven” highlighted the importance of staying vigilant in the face of constant change. According to them, the drivers of change tend to be demographic shifts, technological breakthroughs, or regulatory reform. These points are elaborated upon Return Driven Strategy’s (RDS) 2nd Foundation: Vigilance to Forces of Change. In the case of cable television companies, they are currently facing technological and demographic shifts that have influenced how their consumers behave. While it’s still uncertain whether or not cable television will completely disappear, it is clear that it will never regain the dominance it once enjoyed as many viewers opt for a combination of streaming platforms, YouTube, and social media for their entertainment needs. In light of this, companies involved in this space have to thoroughly reevaluate their business activities to survive. —  If you’re looking to gain a better understanding of Return Driven Strategy and Career Driven Strategy, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo.  Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm. Hope you’ve found this week’s insights interesting and helpful. EXCITING NEWS AHEAD The world of work has shifted, and there’s no going back. The barriers to entry have never been lower for talented professionals to work independently, and today’s massive external workforce is hardly a pandemic-produced fad. Business owners can only survive in the new work landscape by partnering with this deep talent pool. 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Learn more about the importance of flexibility in business operations in next week’s article!