Time Warner, Cord-Cutting and the Threat to Cable Advertising

After roughly two months, the dispute between Time Warner Cable and Journal Broadcast Group has finally been resolved…and just in time for the new fall premiere season, of course. The Milwaukee market dispute, during which Time-Warner subscribers could only access WTMJ-TV with an antenna, wasn’t Time Warner’s only contract fight this fall. They were also in a nationwide spat with Showtime and CBS, which left subscribers across the country seeking alternative avenues to watch “must-see TV” – from the Green Bay Packers first pre-season game locally to the season premiere of Showtime’s “Dexter” nationally. During this time, social media exploded with comments from subscribers threatening to drop Time Warner and move to alternate services such as AT&T U-verse or DirecTV. While the final number of subscribers who left Time-Warner is unknown at this time, it may just be the tip of the iceberg. Many consumers aren’t just switching system providers, they are “cutting the cord” to cable TV altogether.

In the past, the main reason people didn’t subscribe to cable or satellite was largely financial. However, lately the motivation is to make a statement rather than to save money. With the advent of Hulu, Netflix and Amazon Prime consumers don’t need to be at the mercy of cable providers any longer. If they are patient, they will eventually get the latest season of “Mad Men” (maybe a few months behind of everyone) for a fraction of the cost.

As advertising professionals are we panicking over this? Not yet. But we need to be watching the statistics very carefully. According to Nielsen, the average consumer watches 4 hours and 39 minutes of television per day. That’s still a lot of television viewing. However, habits differ dramatically depending on the target audience. According to a recent eMarketer article, there is a high propensity to cut the cord among Netflix subscribers between 30 to 44 years old. Overall, this age group was more likely to subscribe to Netflix than 18- to 29-year-old respondents.

We may not need to worry about cord cutters taking a large chunk out of cable penetration for a few years. However, the area of programming that should pay close attention to this trend is local news. As younger consumers stream content online the reliance on and need for local programming will continue to decline. In the wake of urgent local news, I have found myself seeking more timely information out on Facebook or Twitter than on any television or radio station.

As we start 2014 planning for our clients this will be one trend we will keep our eyes on very carefully.

Updated October 8, 2013