STILL NOT DEAD

THE REMARKABLE RESILIENCY OF THE US TELEVISION INDUSTRY

The Death of Television

makes for great headlines,

but it’s not happening*

!

The Death of Television

makes for great headlines,

but it’s not happening*

!

*not anytime soon

The Death of Television

makes for great headlines,

but it’s not happening*

!

*not anytime soon

(*even if the naysayers prove correct, the demise they’re predicting is still 10-15 years away.)

Here are just of few of the

misconceptions

floating around

Cord-cutting is a

mass movement fueled mostly by tech savvy millennials who get their TV from the internet BROOKLYN

MYTH #1

Cord-cutting is a

mass movement fueled mostly by tech savvy millennials who get their TV from the internet BROOKLYN

WRONG!

MYTH #1

DETROIT

Research shows that when it actually does happen, cord-cutting is largely an economic decision, made by people who can no longer afford pay TV and give it up for rabbit ears, not Netflix, Amazon and Hulu.

© PIKSEL 2013. ALL RIGHTS RESERVED | CONFIDENTIAL PAGE

According to noted industry analyst Craig Moffett, cord-cutting, which he defines as “also including that "gap" created by new household formation that DID NOT translate into Pay TV growth” is happening at a rate of 0.5% a year and actually decelerated in Q3 2013.*

DETROIT

Research shows that when it actually does happen, cord-cutting is largely an economic decision, made by people who can no longer afford pay TV and give it up for rabbit ears, not Netflix, Amazon and Hulu.

*UPDATED 12.13.13 to include clarification from Moffett

More About Cord Cutting

More About Cord CuttingBOOMERANG SUBSCRIBERS

More About Cord CuttingBOOMERANG SUBSCRIBERS

Viewers who cut the cord for economic reasons frequently return to pay TV when their circumstances improve, and then cut the cord again when they deteriorate.

More About Cord CuttingBOOMERANG SUBSCRIBERS

Viewers who cut the cord for economic reasons frequently return to pay TV when their circumstances improve, and then cut the cord again when they deteriorate.

Unlike professionals who make moral/philosophical decisions to abandon pay TV (and write about it on media and tech blogs) this demographic is not lost to the industry forever.

More About Cord CuttingBOOMERANG SUBSCRIBERS

Viewers who cut the cord for economic reasons frequently return to pay TV when their circumstances improve, and then cut the cord again when they deteriorate.

Unlike professionals who make moral/philosophical decisions to abandon pay TV (and write about it on media and tech blogs) this demographic is not lost to the industry forever.

PAY TV PENETRATION

More About Cord CuttingBOOMERANG SUBSCRIBERS

Viewers who cut the cord for economic reasons frequently return to pay TV when their circumstances improve, and then cut the cord again when they deteriorate.

Unlike professionals who make moral/philosophical decisions to abandon pay TV (and write about it on media and tech blogs) this demographic is not lost to the industry forever.

PAY TV PENETRATION

• Pay TV penetration in the US is around 87%

More About Cord CuttingBOOMERANG SUBSCRIBERS

Viewers who cut the cord for economic reasons frequently return to pay TV when their circumstances improve, and then cut the cord again when they deteriorate.

Unlike professionals who make moral/philosophical decisions to abandon pay TV (and write about it on media and tech blogs) this demographic is not lost to the industry forever.

PAY TV PENETRATION

• Pay TV penetration in the US is around 87%• In the early 2000s, it was around 80%

More About Cord CuttingBOOMERANG SUBSCRIBERS

Viewers who cut the cord for economic reasons frequently return to pay TV when their circumstances improve, and then cut the cord again when they deteriorate.

Unlike professionals who make moral/philosophical decisions to abandon pay TV (and write about it on media and tech blogs) this demographic is not lost to the industry forever.

PAY TV PENETRATION

• Pay TV penetration in the US is around 87%• In the early 2000s, it was around 80%• Satellite services added another 6% in the

mid-2000s, mostly those who could not afford or get access to traditional cable

More About Cord CuttingBOOMERANG SUBSCRIBERS

Viewers who cut the cord for economic reasons frequently return to pay TV when their circumstances improve, and then cut the cord again when they deteriorate.

Unlike professionals who make moral/philosophical decisions to abandon pay TV (and write about it on media and tech blogs) this demographic is not lost to the industry forever.

PAY TV PENETRATION

• Pay TV penetration in the US is around 87%• In the early 2000s, it was around 80%• Satellite services added another 6% in the

mid-2000s, mostly those who could not afford or get access to traditional cable

• A final 1% came on board in the past few years, during the digital era

More About Cord CuttingBOOMERANG SUBSCRIBERS

Viewers who cut the cord for economic reasons frequently return to pay TV when their circumstances improve, and then cut the cord again when they deteriorate.

Unlike professionals who make moral/philosophical decisions to abandon pay TV (and write about it on media and tech blogs) this demographic is not lost to the industry forever.

PAY TV PENETRATION

• Pay TV penetration in the US is around 87%• In the early 2000s, it was around 80%• Satellite services added another 6% in the

mid-2000s, mostly those who could not afford or get access to traditional cable

• A final 1% came on board in the past few years, during the digital era

• A recent— and oft-cited— Nielsen study revealed there were 5 million “zero TV households” up from 2 million in 2007.

More About Cord CuttingBOOMERANG SUBSCRIBERS

Viewers who cut the cord for economic reasons frequently return to pay TV when their circumstances improve, and then cut the cord again when they deteriorate.

Unlike professionals who make moral/philosophical decisions to abandon pay TV (and write about it on media and tech blogs) this demographic is not lost to the industry forever.

PAY TV PENETRATION

• Pay TV penetration in the US is around 87%• In the early 2000s, it was around 80%• Satellite services added another 6% in the

mid-2000s, mostly those who could not afford or get access to traditional cable

• A final 1% came on board in the past few years, during the digital era

• A recent— and oft-cited— Nielsen study revealed there were 5 million “zero TV households” up from 2 million in 2007.

• Given that pay TV subscriptions actually grew during that period, many are likely part of the 15 million households (13%) who never had pay TV to begin with.

Numerous surveys show that Americans are largely dissatisfied with their pay TV service, so while cord cutting may not be an issue today, it could soon become one: high prices and dissatisfied customers are a deadly combination.

Numerous surveys show that Americans are largely dissatisfied with their pay TV service, so while cord cutting may not be an issue today, it could soon become one: high prices and dissatisfied customers are a deadly combination.

What’s stopping it?

Numerous surveys show that Americans are largely dissatisfied with their pay TV service, so while cord cutting may not be an issue today, it could soon become one: high prices and dissatisfied customers are a deadly combination.

What’s stopping it? A lack of attractive alternatives:

Numerous surveys show that Americans are largely dissatisfied with their pay TV service, so while cord cutting may not be an issue today, it could soon become one: high prices and dissatisfied customers are a deadly combination.

What’s stopping it? A lack of attractive alternatives:Cobbled together solutions requiring a number of different devices are not a viable mass market option.

Kids pretty much ignore mainstream TV and just watch Netflix on their iPads

MYTH #2

Kids pretty much ignore mainstream TV and just watch Netflix on their iPads

WRONG!

MYTH #2

A recent Kaiser study shows that

71% of 8-18 year olds have a TV in their bedroom.

A recent Kaiser study shows that

71% of 8-18 year olds have a TV in their bedroom.

A Deloitte survey of “trailing millennials (ages 14 -23) shows

that while 20% say they watch

TV on their tablets, 62% are still watching live on a TV set

A recent Kaiser study shows that

71% of 8-18 year olds have a TV in their bedroom.

A Deloitte survey of “trailing millennials (ages 14 -23) shows

that while 20% say they watch

TV on their tablets, 62% are still watching live on a TV set

A 2013 Pew survey shows that

only 35% of Americans actually own tablets.

Viewing habits are changing

Viewing habits are changingThey’re just not there yet.

Viewing habits are changingThey’re just not there yet.

Tablet and streaming viewing index much higher with upper income families, but even there they are far from the dominant behavior.

Viewing habits are changingThey’re just not there yet.

Tablet and streaming viewing index much higher with upper income families, but even there they are far from the dominant behavior.

It’s hard to predict what will become the dominant behavior, but live TV viewed on an actual TV set is still the primary use case for all age and income groups.

Viewing habits are changingThey’re just not there yet.

Tablet and streaming viewing index much higher with upper income families, but even there they are far from the dominant behavior.

It’s hard to predict what will become the dominant behavior, but live TV viewed on an actual TV set is still the primary use case for all age and income groups.

Remember too, that the viewing habits of today’s 12 year olds won’t start to affect the industry for at least 10 more years.

Viewing habits are changingThey’re just not there yet.

Tablet and streaming viewing index much higher with upper income families, but even there they are far from the dominant behavior.

It’s hard to predict what will become the dominant behavior, but live TV viewed on an actual TV set is still the primary use case for all age and income groups.

Remember too, that the viewing habits of today’s 12 year olds won’t start to affect the industry for at least 10 more years.

Your pay TV provider is the one forcing you to

pay for 800 channels you don’t want to watch

MYTH #3

Your pay TV provider is the one forcing you to

pay for 800 channels you don’t want to watch

WRONG!

MYTH #3

The networks are the ones forcing pay TV operators to take

bundles— groupings of channels they own. So if you have ABC, you also have Disney and Disney XD and ESPN and ESPN2

The operators would love to

break up the bundles and offer smaller, cheaper packages but the networks won’t do it.

The networks are the ones forcing pay TV operators to take

bundles— groupings of channels they own. So if you have ABC, you also have Disney and Disney XD and ESPN and ESPN2

The operators would love to

break up the bundles and offer smaller, cheaper packages but the networks won’t do it.

The networks are the ones forcing pay TV operators to take

bundles— groupings of channels they own. So if you have ABC, you also have Disney and Disney XD and ESPN and ESPN2

In their defense, the networks claim that bundling keeps fees

down by spreading out costs, something many analysts believe

is a valid point.

Who Owns What: Network Bundles

Who Owns What: Network Bundles

ABC/DISNEY !ABC Television ABC News Fusion A+E Networks (JV) • A&E • History • Bio. • H2 • Military History • Crime & Investigation • Lifetime • Lifetime Movie Network • Lifetime Real Women Disney Channel Disney Cinemagic Disney Junior Disney XD ESPN ESPN2 ESPN on ABC ESPN Classic ESPNews ESPN Deportes

Who Owns What: Network Bundles

ABC/DISNEY !ABC Television ABC News Fusion A+E Networks (JV) • A&E • History • Bio. • H2 • Military History • Crime & Investigation • Lifetime • Lifetime Movie Network • Lifetime Real Women Disney Channel Disney Cinemagic Disney Junior Disney XD ESPN ESPN2 ESPN on ABC ESPN Classic ESPNews ESPN Deportes

CBS !CBS Television CBS News CBS Sports The CW Showtime Showtime 2, Showtime Showcase, Showtime Extreme Showtime Beyond Showtime Next Showtime Women Showtime Family Zone The Movie Channel The Movie Channel Xtra Smithsonian TV Guide Network !!!!!!

Who Owns What: Network Bundles

ABC/DISNEY !ABC Television ABC News Fusion A+E Networks (JV) • A&E • History • Bio. • H2 • Military History • Crime & Investigation • Lifetime • Lifetime Movie Network • Lifetime Real Women Disney Channel Disney Cinemagic Disney Junior Disney XD ESPN ESPN2 ESPN on ABC ESPN Classic ESPNews ESPN Deportes

CBS !CBS Television CBS News CBS Sports The CW Showtime Showtime 2, Showtime Showcase, Showtime Extreme Showtime Beyond Showtime Next Showtime Women Showtime Family Zone The Movie Channel The Movie Channel Xtra Smithsonian TV Guide Network !!!!!!

NBC UNIVERSAL !Bravo Chiller Cloo CNBC E! Esquire Channel G4 MSNBC Mun2 NBC NBC Sports Oxygen PBS Kids Sprout Syfy Telemundo The Golf Channel The Weather Channel (JV) TV One (JV) Universal HD USA Network !

Who Owns What: Network Bundles

ABC/DISNEY !ABC Television ABC News Fusion A+E Networks (JV) • A&E • History • Bio. • H2 • Military History • Crime & Investigation • Lifetime • Lifetime Movie Network • Lifetime Real Women Disney Channel Disney Cinemagic Disney Junior Disney XD ESPN ESPN2 ESPN on ABC ESPN Classic ESPNews ESPN Deportes

CBS !CBS Television CBS News CBS Sports The CW Showtime Showtime 2, Showtime Showcase, Showtime Extreme Showtime Beyond Showtime Next Showtime Women Showtime Family Zone The Movie Channel The Movie Channel Xtra Smithsonian TV Guide Network !!!!!!

NBC UNIVERSAL !Bravo Chiller Cloo CNBC E! Esquire Channel G4 MSNBC Mun2 NBC NBC Sports Oxygen PBS Kids Sprout Syfy Telemundo The Golf Channel The Weather Channel (JV) TV One (JV) Universal HD USA Network !

FOX !Big Ten Network (JV) Fox Business Network Fox College Sports Fox Broadcasting Fox News Channel Fox Soccer Plus Fox Sports 1 Fox Sports 2 Fox Sports Networks FX FXX FX Movie Channel National Geographic Channel (JV) Nat Geo Mundo (JV) Nat Geo Wild (JV) !!!!!!

Who Owns What: Network Bundles

ABC/DISNEY !ABC Television ABC News Fusion A+E Networks (JV) • A&E • History • Bio. • H2 • Military History • Crime & Investigation • Lifetime • Lifetime Movie Network • Lifetime Real Women Disney Channel Disney Cinemagic Disney Junior Disney XD ESPN ESPN2 ESPN on ABC ESPN Classic ESPNews ESPN Deportes

CBS !CBS Television CBS News CBS Sports The CW Showtime Showtime 2, Showtime Showcase, Showtime Extreme Showtime Beyond Showtime Next Showtime Women Showtime Family Zone The Movie Channel The Movie Channel Xtra Smithsonian TV Guide Network !!!!!!

NBC UNIVERSAL !Bravo Chiller Cloo CNBC E! Esquire Channel G4 MSNBC Mun2 NBC NBC Sports Oxygen PBS Kids Sprout Syfy Telemundo The Golf Channel The Weather Channel (JV) TV One (JV) Universal HD USA Network !

FOX !Big Ten Network (JV) Fox Business Network Fox College Sports Fox Broadcasting Fox News Channel Fox Soccer Plus Fox Sports 1 Fox Sports 2 Fox Sports Networks FX FXX FX Movie Channel National Geographic Channel (JV) Nat Geo Mundo (JV) Nat Geo Wild (JV) !!!!!!

VIACOM !BET CMT CMT Pure Country Comedy Central Logo MTV MTV2 MTV Hits MTV Jams mtvU Nick at Nite Nick Jr. Nickelodeon Nicktoons Palladia Spike TeenNick Tr3s TV Land VH1 VH1 Classic VH1 Soul

Cutting the cord and switching to web TV lets you

stick it to the cable companies for overcharging you!

MYTH #4

Cutting the cord and switching to web TV lets you

stick it to the cable companies for overcharging you!

WRONG!

MYTH #4

Where do you think that internet connection comes from?

The MVPDs own the broadband connections in the US, and with just two or three providers to choose from, competition isn’t fierce

Where do you think that internet connection comes from?

The MVPDs own the broadband connections in the US, and with just two or three providers to choose from, competition isn’t fierce

Where do you think that internet connection comes from?

That’s why the MVPDs aren’t too worried about you switching to Netflix. They’ll just impose bandwidth caps to make up the difference

Net Neutrality and GAFA

Net Neutrality and GAFA

GAFA (GoogleAmazonFacebookApple) have all been trying to break into the TV industry to no avail. The networks and studios believe they have no reason to play ball with them.

Net Neutrality and GAFA

GAFA (GoogleAmazonFacebookApple) have all been trying to break into the TV industry to no avail. The networks and studios believe they have no reason to play ball with them.

Recent speculation has centered on GAFA lobbying to break up the hold the MVPDs have on broadband access in the US and it’s potential interference with the principle of Net Neutrality.

Net Neutrality and GAFA

GAFA (GoogleAmazonFacebookApple) have all been trying to break into the TV industry to no avail. The networks and studios believe they have no reason to play ball with them.

Recent speculation has centered on GAFA lobbying to break up the hold the MVPDs have on broadband access in the US and it’s potential interference with the principle of Net Neutrality.

Were they to convince the powers that be to redistribute broadband access, the effect on the industry would be considerable.

Second Screen is all about

Social TV and Social TV is all

about Twitter

MYTH #5

Second Screen is all about

Social TV and Social TV is all

about Twitter

WRONG!

MYTH #5

Second Screen is more than just social TV and social TV is more than just Twitter

75% of Americans rarely, if ever, use Twitter and that number seems to be staying pretty static

Second Screen is more than just social TV and social TV is more than just Twitter

75% of Americans rarely, if ever, use Twitter and that number seems to be staying pretty static

Second Screen is more than just social TV and social TV is more than just Twitter

The trend towards binge viewing and time-shifted viewing works against Twitter’s time-sensitive platform.

More About Second Screen

More About Second ScreenTWITTER

While Twitter is popular with event shows, game shows and shows aimed at teenage girls, another type of second screen experience is being developed to account for binge and time-shifting viewing.

More About Second ScreenTWITTER

While Twitter is popular with event shows, game shows and shows aimed at teenage girls, another type of second screen experience is being developed to account for binge and time-shifting viewing.

Aimed at serious fans rather than casual viewers, these experiences are designed to be accessed after, rather than during, the show, when fans can spend more time with them.

More About Second ScreenTWITTER

While Twitter is popular with event shows, game shows and shows aimed at teenage girls, another type of second screen experience is being developed to account for binge and time-shifting viewing.

Aimed at serious fans rather than casual viewers, these experiences are designed to be accessed after, rather than during, the show, when fans can spend more time with them.

They can also be ad supported, creating a second revenue stream for networks and operators.

More About Second ScreenThe 4 S’sTWITTER

While Twitter is popular with event shows, game shows and shows aimed at teenage girls, another type of second screen experience is being developed to account for binge and time-shifting viewing.

Aimed at serious fans rather than casual viewers, these experiences are designed to be accessed after, rather than during, the show, when fans can spend more time with them.

They can also be ad supported, creating a second revenue stream for networks and operators.

More About Second ScreenThe 4 S’s

Future second screen experiences will be populated by some combination of the 4 S’s:

TWITTER

While Twitter is popular with event shows, game shows and shows aimed at teenage girls, another type of second screen experience is being developed to account for binge and time-shifting viewing.

Aimed at serious fans rather than casual viewers, these experiences are designed to be accessed after, rather than during, the show, when fans can spend more time with them.

They can also be ad supported, creating a second revenue stream for networks and operators.

More About Second ScreenThe 4 S’s

Future second screen experiences will be populated by some combination of the 4 S’s:

STORIES: scenes from next week, behind the scenes videos, cast member interviews, etc. SOCIAL: in-app message boards and blogs plus Twitter and FacebookSTATS: sports statistics, polls, voting, infographicsSHOPPING: t-commerce from product placement and advertising

TWITTER

While Twitter is popular with event shows, game shows and shows aimed at teenage girls, another type of second screen experience is being developed to account for binge and time-shifting viewing.

Aimed at serious fans rather than casual viewers, these experiences are designed to be accessed after, rather than during, the show, when fans can spend more time with them.

They can also be ad supported, creating a second revenue stream for networks and operators.

TV viewing has

decreased

MYTH #6

Thanks to the internet, people are watching less TV

TV viewing has

decreased

WRONG!

MYTH #6

Thanks to the internet, people are watching less TV

Time-shifting and VOD means that more people are watching than ever before.

People are watching more TV than ever.

They’re just not watching it live.

Time-shifting and VOD means that more people are watching than ever before.

People are watching more TV than ever.

They’re just not watching it live.

Hence the pressure on Nielsen to take a full 7 days of time shifted viewing into account

TV Everywhere is the future. We’ll be able to

watch TV wherever, whenever and however we want

MYTH #7

TV Everywhere is the future. We’ll be able to

watch TV wherever, whenever and however we want

WRONG!

(sort of)

MYTH #7

We’ll be able to watch TV whenever and however,

but wherever

may still be an issue

Out-of-home doesn’t have many use cases beyond news and live sports and rights issues continue to be an issue, so operators may not push it.

We’ll be able to watch TV whenever and however,

but wherever

may still be an issue

The TV Industry Is Changing

The TV Industry Is Changing

It’s just not changing as fast as many would like it to.

The TV Industry Is Changing

It’s just not changing as fast as many would like it to.

A lot of that has to do with the fact that most players are still making money. So there’s no incentive for them to change and the industry is too tightly bound together for anyone try and go it alone.

The TV Industry Is Changing

It’s just not changing as fast as many would like it to.

A lot of that has to do with the fact that most players are still making money. So there’s no incentive for them to change and the industry is too tightly bound together for anyone try and go it alone.

The key to success in the years ahead will be to constantly re-evaluate your decisions. Because what made sense six months ago, may no longer make sense today.

The TV Industry Is Changing

It’s just not changing as fast as many would like it to.

A lot of that has to do with the fact that most players are still making money. So there’s no incentive for them to change and the industry is too tightly bound together for anyone try and go it alone.

The key to success in the years ahead will be to constantly re-evaluate your decisions. Because what made sense six months ago, may no longer make sense today.

Things change slowly. And then, all at once.

Thank You.

If you’d like to benefit from insights like the ones you found here, contact us at info@piksel.com

Some Proof I’m Not Just Making This Up

SLIDE 5: “Moffett and Nathanson wrote. "We have always argued that cord-cutting is an economic phenomenon, not a technological one. ... Rapidly rising prices are squeezing lower-income consumers out of the ecosystem.” Los Angeles Times, Nov 12, 2013 !SLIDE 5: Pace Of Cord-Cutting Growth Slows in Q3: Analyst. Multichannel News, Nov 12, 2013 !SLIDE 6: Study: U.S. Broadband Homes Without Pay-TV are Basically Flat at 9% VideoNuze iQ, Oct 3, 2013 !SLIDE 9: Kaiser Study. Pew Study. Deloitte Study !SLIDE 18: In their IPO filing, Twitter stated they had 100 million “active users” and that 77% of usage was US-based. 77 million people = 24.5% of the population. !SLIDE 18: Twitter Has A Serious User Growth Problem Ahead of its IPO, AllTwitter, Oct 17, 2013 !SLIDE 21: Surprise, You’re Watching More TV Than Ever, AllThingsDigital, Dec. 4, 2013 !SLIDE 23: Report: Pay-TV Tablet App Usage Improves, But Still Nominal Video iQ, Sept 3, 2013 !