Hulu, a website that offers shows from NBC, ABC and Fox, doubled its subscribers last year while increasing its revenue 65 percent. Meanwhile, many of the online services are starting to make their own shows: Hulu debuted 10 of its own programs last year and Netflix has five in production, including House of Cards, a political thriller starring Kevin Spacey that debuts next week.
• Attacking cable from a different direction, Aero TV uses tiny but powerful antennas to capture broadcast signals from the air, records them, then reroutes them into a viewer’s computer or OTT player to be watched whenever he wants. Because Aero pays nothing to the broadcasters (a practice being challenged in court) it can offer its service for as little as $8 a month. Last year’s start-up in New York City was so successful that Aero is expanding to 22 more cities — including Miami — this year.
Senior television executives caution against any expectation that their industry is about to embark on an instant makeover, and the numbers bear them out. Hulu’s three million subscribers are about one-seventh the number of viewers who watch NCIS each week on CBS, and its $700 million in annual revenues is tip money compared the $3.4 billion CBS generated in a single fiscal quarter last year. “This is going to be an evolution, not a revolution,” says Bruce David Klein, president of the independent production company Atlas Media.
But the technological advances in Internet television come at a time when customer grumbling over escalating cable prices has grown to a roar and a younger generation of viewers more comfortable with computers than TVs is starting to set up its own households. The new alignment of attitudes is already taking a toll.
Subscriptions to cable and satellite television peaked in 2010 and have fallen five percentage points since then, the research company TDG reported late last year. Meanwhile, consumer satisfaction with cable service, which had held steady for years between 65 and 70 percent, dropped 10 percentage points.
“The most interesting part of that report, to me, was that it said a lot of the people without cable are not ‘cord-cutters’ but cord-never-havers,” says Jim Flynn, president of Massachusetts-based Overlook TV. “We employ some of those people at my company. They’re in their early 20s, just out of college, and for them, paying $100 or $200 a month for cable TV is just not an option. And they don’t feel bad about it. They’re part of this millennial generation who are perfectly happy getting all their video over the Internet.”
Flynn’s company helps people to do just that, working to assist companies that want to set up Internet-based TV channels. He knew the business would work, he said, when Overlook created a jokey test channel called Creepster that aired cultish old horror films. (“The kind where you can see the guy running dangling the flying saucer from a fishing line.”) It wasn’t just a technical success but a financial one, with thousands of ardent subscribers at $5 a month.
“It’s a niche channel, but you can make money off a niche channel,” Flynn says. “You can set up one of these channels for as little as $9,000. Even the high end is $50,000. And at that price, if you can get 1,000 people to pay $5 a month, you can make money. It’s a lot easier and cheaper than trying to create a channel that will get onto cable or satellite.”