A new era of à la carte television arrived in earnest this week — seemingly all at once and more quickly than many industry executives and television fans had expected. And with it, the virtual monopoly that cable, satellite and telecommunications companies have had over TV programming is dissipating.
Just one day after HBO said it would start an Internet-only offering, CBS announced on Thursday its own subscription streaming service that lets people watch its live programming and thousands of current and past shows on demand.
The moves signal a watershed moment for web-delivered television, where viewers have more options to pay only for the networks or programs they want to watch — and to decide how, when and where to watch them. Rapidly fading are the days in which people pay an average of $90 a month for a bundle of networks from a traditional provider.
“Everybody is talking about it,” Leslie Moonves, chief executive of the CBS Corporation, said in an 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.”
Mr. Moonves wants his channel to stay relevant to a new generation of “cord nevers,” people who have never paid for a standard television package, and “cord cutters” who have canceled their cable service.
The push into web-only offerings by HBO and CBS, two networks that earn billions of dollars in profits from the traditional system, highlights how rapidly the balance of power is shifting in the television landscape. The CBS All Access service, at $6 a month, made its debut on Thursday; details about HBO’s service, which is set to start in 2015, are still hazy.
The initiatives are largely a reaction to the success of Netflix, whose popular streaming service has more than 50 million global subscribers. Along with Netflix, a host of other insurgents like Amazon and Hulu now offer on-demand programming that can be watched anytime and anywhere on a laptop or a smartphone. New technologies, including “smart” televisions and streaming devices like Apple TV and Roku, also allow viewers to watch Internet-delivered video on a big screen.
Reed Hastings, the chief executive of Netflix, said in an interview that the new wave of streaming options from traditional outlets validated his company’s long-held belief that the Internet was replacing traditional television, apps were replacing channels, remote controls were disappearing and screens were proliferating. He said increased competition would force Netflix to work harder but would also evangelize Internet video.
“We are Internet disrupters, through and through,” he said. “We are continuing to push that edge.”
Media executives are eager to appeal to the fast-growing number of viewers who pay for Internet but watch TV via cheaper streaming alternatives, or free video options like YouTube and other social media. The growth of subscriptions to cable and satellite services has stalled, dropping 0.5 percent to 101.4 million this year, from 101.9 million in 2012, according to SNL Kagan. Among people ages 18 to 34, about one in six said that they did not watch any original television series on a traditional television set in the last 30 days, according to comScore.
Take Jennifer Seide, 28, a Queens resident who watches at least four hours of television a day. She pays Verizon about $60 a month for Internet access but does not pay for a conventional TV subscription. She stays up-to-date on the latest shows via an $8-a-month subscription to Netflix, a friend’s subscription to Hulu, another friend’s subscription to HBO, and YouTube.
Ms. Seide said she was thrilled with this week’s news. “With cable, you get a lot of stuff, but it is a lot of stuff that you don’t want,” she said. “With the Internet, you can pick and choose the shows that you want.”
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By Vanessa Perez and Rebekah Fergusson on Publish Date September 3, 2014.Sports are one major component holding the cable bundle together. Notably, the new CBS service does not include National Football League games. Executives at the network said that they were in discussions with the N.F.L. and that other live sports like March Madness were already available to stream.
Many viewers will continue to pay for cable or satellite because of live sports programming on ESPN and other networks, which pay sports leagues big dollars for the rights to broadcast games. Live matches are one of the few remaining types of programming that still draw high ratings, and analysts say that sports fans who want to watch them will not be able to cut the cord. That said, a growing number of sports options exist on the web with a traditional pay-TV package, including ESPN3. And some sports leagues, like Major League Baseball, sell Internet-only subscriptions to their games.
The networks that offer new streaming services must perform a delicate balancing act so as not to cannibalize the billions of dollars that cable and satellite operators pay them to distribute their programming. CBS and HBO were careful to say that they would work with both current and new business partners and that their new initiatives would not cut into their existing business. Some analysts were skeptical. The new stand-alone web services could cause cable companies to demand that CBS and HBO charge lower fees for their programming. To hold on to potential cord-cutters, cable companies like Comcast and Charter Communications could be forced to create more segmented packages. But in some ways, the new web-only products could benefit the cable companies, which make billions of dollars selling Internet service in the home. Netflix, and now CBS and HBO, needs broadband service to reach customers over the web.
CBS and HBO are not the only two new web-only offerings. Sony is preparing an Internet product expected to include programming from Viacom, the parent of networks like Comedy Central, MTV and Nickelodeon. DirecTV also said that it would start an online video service. A similar service from Showtime, the premium cable network owned by CBS, is likely in the “not too distant future,” Mr. Moonves said.
It remains to be seen how many different web-TV subscriptions viewers will pay for, especially if the total adds up to more than the cost of a traditional cable package. Netflix starts at $8 a month and Hulu’s premium service costs $8 a month. A membership to Amazon Prime, which includes video streaming, is $99 a year. But one thing is certain: Viewers today have more power to create their own television bundles.
CBS is an unlikely disrupter. It did not join its rivals ABC, Fox and NBC when they started Hulu in 2008, for example. But it held on to the digital rights for its programming so that it could build its own web and mobile offerings, like CBS All Access. Subscribers will be able to stream local CBS television stations in 14 markets, including Chicago, Los Angeles and New York, with more affiliates expected to join. (People have long been able to watch broadcast television networks free via antennas.)
The CBS service will make available on demand in all United States markets episodes of current shows like “The Big Bang Theory” and “NCIS” the day after they are shown, and more than 5,000 episodes of shows it is calling CBS Classics like “Star Trek,” “Cheers” and “MacGyver.” (“Cheers,” though broadcast on NBC, is distributed by CBS Television.)
Advertisements on the live stream will be the same as those on the traditional CBS broadcast. For the on-demand programming, the typical 12 to 16 minutes of ads an hour will be reduced 25 percent. CBS Classics will stream without ads.
“It is going to look a lot like Netflix,” said Marc DeBevoise, an executive vice president at CBS Interactive.