It was 1985, I was wrapped up next to my dad in his green army surplus blanket watching Street Hawk. We were amazed at the clarity of the TV picture. There was no “snow” from the rabbit ears thanks to our local cable company spending the last twelve months digging trenches in all the neighborhood streets. We now had 40+ channels of unlimited entertainment pipped directly into our house. It felt like the future had arrived.

In those days 30 years ago, the cable company offered a one-two punch.

1) Unmatched picture quality

2) Unheard of content choice

Sure, at the time it cost $40 a month for a service most americans were previously getting for free over the air, but who cares?! It was an amazing value! If my family and I watched 2 movies a month on HBO it paid for itself. Life was good for the cable companies. People couldn’t wait to give them money. In more rural areas where laying cable was cost prohibitive, satellite companies stepped in to service eager customers. The cable/satellite product was so compelling customers would accept 8+ hour service windows for a tech to arrive. It was a small price to pay for this new TV paradigm.

That ship has sailed. Cable’s consumer advantages are gone.

1) Picture quality. In the ongoing effort to pack more and more content on their pipe cable companies use compression technology to deliver more channels with less bandwidth. More compression leads to lower image quality. Today the best quality image for broadcast television is via an OTA TV antenna. It’s the only source available that lets a consumer receive the channel in the pure form that the station broadcasts it in. Cable and satellite companies always perform additional compression on the feed before sending it to consumers.

Don’t get me wrong, the cable/satellite companies compression technology still looks pretty good. In fact, compression technology as a whole has gotten good enough that a decent broadband internet connection can provide a picture with high enough quality an average “lay person” won’t distinguish the difference.

Cable doesn’t offer the best quality for a videophile that cares about it. They also don’t offer a picture that’s substantially better than what someone can get from a broadband connection. They don’t have a picture that is better for the high end or the low end. That’s really bad news for an industry who has been relying on picture quality as a major selling point for the last 30 years.

2) Content choice. Before the internet cable TV was the de-facto standard for content choice. You’re a History buff? We have a channel for that. You’re a do-it-yourself type? We have a channel that shows Bob Villa-esque shows 24 hours a day. You like news? We’ve got so much news we can make it up on the spot.

Then came the internet. Cable can’t compete against the internet for choice. 100 hours of video are uploaded to youtube every minute. That’s 6,000 hours of new video content added every hour. To match 6,000 hours of new content per hour a cable company would need to offer 6,000 channels and not allow re-runs EVER. That’s just to match one website.

Some will argue that cable actually has programming people want to watch. Well, maybe, but because content creators and advertisers are always looking for ways to reach more people the internet eventually will offer better content than cable.

Youtube claims 1 billion unique visitors each month. That’s about 250 million unique visitors per week. According to Neilson ratings the top 20 cable and broadcast TV shows for the final week of 2014 earned about 293 million viewers. Those viewers aren’t necessarily unique. In fact, football games claimed the top 8 spots for the week representing some 170 million viewers. I’ve got a hunch many of those viewers watched more than one game making them not unique viewers. With that in mind, YouTube’s 250 million unique viewers is a lot closer to TV’s 293 million viewers than one might suspect. Again, youtube is only one website. It’s clear the internet is already on par for claiming eyeballs if not already winning.

The Writing on the Wall

The cable companies aren’t oblivious to the problems they face. In 2010 Comcast, North America’s largest cable provider, purchased media conglomerate NBC Universal. A major content distributor owning a major content producer raised concerns, but the FCC approved the deal. I believe the merger is evidence that Comcast knows they are losing the battle for content choice and are attempting to grab some control. However, it’s likely too little too late to compete against the kind of massive choice the internet provides consumers.

The bottom line is that cable/satellite no longer provides a superior product. Recent outrage over cable provider’s customer service is mounting evidence of the over-all dissatisfaction with the product. The product is no longer as compelling. When a product is compelling people are willing to put up with inferior service. As demand for a product wanes the pressure for companies to compete in areas like customer service increases.

The cable business is dying, but the problem isn’t people cutting the cord. The problem is the cable companies no longer giving consumers a compelling reason NOT to cut the cord. Offer a product that people want and you’ll always have business. 

Getting into internet distribution was a brilliant move by the cable companies. That’s a direction they’ve seen growth, but they need to be willing to cannibalize their current TV distribution model to fully provide the next generation internet product that consumers will crave.

In my next post I’ll talk about one such potential product, Sling.TV.