The increasing numbers of cord-cutters and cord-shavers are changing the greater television industry. After years of labeling the cord-cutting trend as "pure fiction," television metric firm Nielsen recently reported that television viewing on traditional TVs continues to decrease.
In Nielsen's Q1 2015 Total Audience Report, the company reported that traditional TV is falling in both total viewing time and in entertainment market share, as it struggles to compete with growing smartphone usage.
When looking at demographics, the numbers look even more ominous for pay-TV. For adults over 50, traditional TV was the dominant viewing format, with nearly 50 hours of viewing per week. By contrast, adults ages 18-34 spend less than 22 hours per week watching TV, with an additional 19 hours coming from Internet-based media: PCs, smartphones, and tablets.
For both cable providers and networks, this is an obvious conundrum. On one hand, traditional, large-package TV bundles are a lucrative business model. On the other, however, growing numbers of subscribers are moving away from traditional TV, and it would be unwise to not try to offer tailor-made streaming solutions for these viewers, especially for cable providers that could lose out on the opportunity to shape these nascent solutions.
Meet Comcast's newest streaming service: Stream
While noting the changing ways that viewers are consuming content, Comcast announced its new streaming video service, dubbed Stream (a working title, I guess). The service boasts of no extra device or additional equipment required, and at $15 a month, it comes in cheaper than Sling TV's $20. The service will provide broadcast networks ABC, CBS, Fox, NBC, and CBS, along with premium channel HBO.
However, there are some differences between these two services. On the channel format, The New York Times reports that Comcast's service will not include ESPN, a huge blow for those looking for sports without the large cable package. Perhaps that's a reason for the lower price, as ESPN is by far the most expensive cable channel. This could make Comcast's service a great deal for cord-cutters who aren't terribly interested in sports.
In addition, unlike DISH's Sling TV, which is Internet-provider agnostic, Comcast's Stream is only available to its Comcast Xfinity Internet subscribers. By only offering Stream to people with Comcast's Internet service, the company can potentially position Stream as a differentiator for its Xfinity service and perhaps add Internet-only subscribers.
Continued strain on the business model
The risk in this offering, of course, is that there will be a massive trade-down of subscribers that will choose Stream over the standard Comcast pay-TV package they are accustomed to. However, I think we're still far from a wide-scale defection to streaming TV -- otherwise a flood of customers would have already signed up for DISH's Sling TV.
Some networks have also negotiated to pull their channels from streaming offerings if they become too popular, essentially limiting these offerings from becoming too big. For example, Disney's ESPN negotiated with DISH's Sling TV an exit clause that would allow it to pull its programming if it lost more than 3 million households after May 2014 -- and it's now within its right to drop out, as it has lost 3.2 million subscribers in that timeframe.
Nevertheless, Comcast's move shows continued strain on the traditional TV market of yesteryear. And, yes, this is probably not a game-changer, but it does signify that even cable behemoth Comcast is looking to court cord-cutters and cord-trimmers.
Jamal Carnette has no position in any stocks mentioned. The Motley Fool both recommends and owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.