The new services will not require a subscription to a traditional television service such as cable or satellite and could eventually bypass the need for local broadcast affiliates.
More and more networks and production companies will be following suit very fast – or slowly to their own peril – experts say.
“It’s not far down the road when no one will have cable television in their home any more but rather will have all programming through the Internet,” says Jeff McCall, professor of communication at DePauw University. “The days when we had to get programming through TV over the air, satellite, or cable are gone. The old media will have to adapt very fast or be left in the dust."
Professor McCall and many others say a new era of smorgasbord television – in which viewers get to cherry pick only the programs they want to watch – has arrived, and much more quickly than many observers expected.
Eager to be part of the new model, CBS, a traditional broadcast network, announced its subscription Internet service was launching Thursday in 14 markets.
“CBS All Access” will cost $5.99 a month and include both current hits like “The Big Bang Theory” and classic shows such as “Cheers” and “Star Trek.”
“Everybody is talking about it,” Leslie Moonves, chief executive of the CBS Corp., said of the shifting model in a New York Times interview. “It is an important part of our future. Our job is to do the best content we can and let people enjoy it in whatever way they want. The world is heading in that direction.”
The entire broadcast world stood up and took notice last year with the over-the-top success of Netflix’s original series, “House of Cards,” which has spotlighted the lucrative potential of cheaper streaming alternatives. Netflix costs $7.99 per month and has watched their subscriber base rise to more than 50 million internationally. Some 36.3 million of those are in the US. Others, such as Amazon and Hulu, have offered on demand programming in recent years that can be watched anywhere and anytime on a smartphone or laptop.
However, Netflix may be a victim of its own success. Its stock plummeted almost $100 on Thursday after reporting slowing subscriber growth. And analysts said HBO’s announcement Wednesday that it would offer its own streaming service in 2015 played a role in the stock dropping 20 percent. HBO has more than twice as many subscribers – 120 million worldwide to Netflix’s 53 million members.
While cable executives may be eyeing HBO’s and CBS’s move with consternation, consumers could benefit from being able to choose which networks are of most interest to them, media watchers say. It frees consumers from bundling, where a sports fan, for example, had no choice but to pay for stations they had no intention of watching in order to get ESPN, or where an Anglophile was paying extra every month in order to get a tier that included BBC America.
“Will this be good for consumers? Yes, if good means more programming choices,” says Len Shyles, a communications professor at Villanova University in Philadelphia. “It will likely mean significantly more competition.”
HBO has yet to reveal what it might charge for its content or what shows it might offer.
“With the advent of smart TV, in which a TV show on Netflix can be seen as easily as a series on HBO, the difference between Netflix and HBO is rapidly diminishing,” says Paul Levinson, author of “New New Media.” "What is becoming increasingly important is not where the TV series is streamed, but how good the TV series is. Which network will come up with the most original, exciting programming? The answer to that question will determine which networks will thrive. The convergence of all media means that content is king.”
As more consumers cut the cable cord, HBO is seeking ways to get ahead of the curve and reach viewers directly, says Mark Tatge, Baldwin Fellow of journalism and mass communications at the University of South Carolina. About 1.7 million Americans canceled their cable subscriptions last year, he notes.
“HBO’s move is an example of how the cable business is being disrupted by the Internet and cheaper streaming alternatives,” he says.
Cable rates have soared, at four times the rate of inflation when measured against the Consumer Price Index, he says.
“Wages have not kept pace, so people are trying to trim their monthly cost of living,” says Professor Tatge. “The people at HBO have to be looking at these numbers. Netflix has had much success. I expect Showtime and the other pay-TV premium channels to follow with similar packages.”