TV grapples with Netflix effect as more consumers cut cable ties

Originally published in Business in Vancouver on May 18, 2018.

At the end of the 2016-17 television season, The Big Bang Theory was the most popular television show in the United States, with a rating of 11.5.

This means that, whenever a new episode of the comedy show aired live, an estimated 11.5% of all television households in the country were watching it on their local station.

This might seem like a fantastic number for television producers, but it outlines a steady decline in traditional viewership.

Ten years earlier, in 2006-07, the most popular television show in the United States was the Wednesday edition of  American Idol, with a rating of 17.3. If we go back to 1996-97, ER topped the charts with a rating of 21.2. Ten years earlier, in 1986-87, the most popular television program in the United States was The Cosby Show, with a rating of 34.9.

At the time The Cosby Show managed to get more than a third of television households to tune in to NBC, a show with an 11.5 rating would not have made it into thetop 40. Its producers would have faced a reboot or cancellation. Now, reaching more than 10% of television households in a given night is cause for celebration.

The steep drop in live television viewership has been accompanied by advancements in technology. Personal video recorders and streaming video were still in their infancy in 1997, but became more prevalent 10 years later and are practically everywhere now. It is the ability to choose content that is making North American audiences abandon the tradition of waiting a week (or longer) for their favourite program.

Canada is not immune.

Most of the content Canadians can watch on prime time is shown on American networks and makes its way to our homes through cable television. A recent Research Co. survey shows that age and region play a role in the way we are reacting to the content that is at our disposal.

For starters, a third of Canadians (33%) have cut the cord and do not have cable television at home. More than seven in 10 Canadians aged 35 and over are keeping their cable, but millennials – a coveted group for advertisers – are looking elsewhere. Only 54% of Canadians aged 18 to 34 have a cable subscription.

This discrepancy presents a conundrum for advertisers, marketing managers and news content providers. Millennials are choosing other platforms for their content, with streaming services fast becoming a staple of their media consumption.

Among the cable subscribers we talked to, the feelings are not exactly pleasant. There is practically universal agreement with two thorny issues: 88% of Canadians say there are many channels included in their current cable television plan that they never watch and 85% agree with the notion of “paying too much money for cable television each month.”

The arrival of ultra-cheap cable packages has not made Canadians happier about their television content. Flipping through channels that are never watched can be cumbersome.

This unpleasantness is also reflected in the fact that a slightly smaller but still sizable proportion of Canadian cable subscribers (70%) say they are disappointed with the variety of programming they are getting from their cable television plan. The numbers are highest in Atlantic Canada (78%) and British Columbia (75%). This is not a stat that should be spurned by our province’s media providers: three-in-four B.C. residents with cable are dissatisfied with what they are paying for. If these current consumers become more aware of cable-less options, as millennials clearly have done, they might opt to cut the cord.

But cutting the cord has provided a different challenge for governments. With streaming services gaining prominence, the idea of a “Netflix tax” consumed a lot of airtime and ink last year. In the end, the federal government ultimately abandoned this idea, which is especially popular only in one province.

In Quebec, the provincial government has compelled streaming services to start charging the Quebec Sales Tax in 2019. The Quebec government seeks to generate approximately $270 million each year from this move and ensure that local content providers – which might have a hard time being featured on streaming services – can compete with American behemoths like Netflix or Amazon Prime Video.

At this stage, the Netflix tax seems like a distant memory in English Canada. But if consumers continue to walk away from traditional television, federal and provincial governments might consider following Quebec’s lead, even if protecting local culture is not invoked as the main reason for their action. 

Photo Credit: Gage Skidmore

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