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TV Everywhere Is Getting Better. But It Won’t Stop the Pay-TV Empire From Crumbling

Winter is coming for the pay-TV industry. And there’s nothing the biz can rustle up, not even dragons, to prevent it.

After years of growth — both in subscribers and prices — the number of people who buy television subscriptions has started to decline. The pay-TV cash machine will slow down. The healthy margins cablers enjoy today are bound to contract, and some networks may perish altogether.

TV Everywhere has been the Great New Hope for programmers and their cable, satellite and telco distribution partners. The pitch goes like this: We’re giving you a venti latte for the price of a grande latte! Watch TV on any device, anytime, anywhere, without paying extra. (Well, aside from the regular-as-clockwork price hikes you’ll see on your TV bill.)

That story is fine as far as it goes. But lots of people just want to pay for a smaller latte. The more worrisome trend: More (younger) people will decide they don’t even want a latte at all.

SEE ALSO: TV Subscriptions Down; Will Cord-Cutting Get Worse?

The industry offers proof points that TV Everywhere is, indeed, working. Of subscribers who use TVE, 98% agreed that multiscreen video adds value to their pay-TV subscription, with 67% saying it adds “a lot” of value, according to a new Viacom-sponsored survey of 1,300 viewers 13-49 and 600-plus kids 2-12. And viewing on other screens is generally accretive: 64% of TV Everywhere users said they watch more TV overall — and 72% of millennial TVE users said they’re watching more TV.

But not everyone uses, or even cares about, TV Everywhere. Just 6% of pay-TV subscribers use TVE at least weekly, and only 21% had even downloaded a TV Everywhere app, per a Digitalsmiths Q4 2013 survey.

Will those stats rise as networks add more content and more MSOs and satellite ops get on board? Probably. But more to the point, TVE does nothing to address the No. 1 complaint among pay-TV subscribers: higher prices.

To industry execs, convincing people to keep paying for TV is a marketing issue. “We have superior content,” John Skipper, president of ESPN and co-chairman of Disney Media Networks, told Cable Show attendees last month. “Shame on us if we don’t protect our turf” against digital insurgents.

But pay TV bundles are becoming an increasingly harder sell. Americans watch only 9% of the channels they’re paying for. The issue of high prices (e.g. poor value) is the leading factors that gives subscription TV providers among the lowest customer-satisfaction ratings of any sector. You’re kidding yourself if you believe that Comcast taking over Time Warner Cable or AT&T swallowing DirecTV will do anything to fix that.

To be sure, there’s a ton of content bundled with Netflix that is rarely watched. And, it’s worth noting, Netflix is raising prices, too. But if you want to talk about value, Netflix vs. the pay-TV bundle is no contest.

Meanwhile, media-consumption patterns, especially younger audiences, are undeniably shifting to Internet video. YouTube and its multichannel network partners like Disney’s Maker Studios and DreamWorks Animation’s AwesomenessTV love to point out that they regularly reach more younger viewers than most cable TV nets.

Speaking of YouTube: Check out Twitch, which should strike fear into the hearts of sports network execs everywhere. The live videogaming service, which Google plans to buy for $1 billion, has 45 million monthly viewers and growing. Twitchers watch an average of 106 minutes of video per day — not quite the five hours daily American TV households supposedly spend with the tube, but it’s an attention-grabbing number.

NBA or NHL playoffs? Screw that. The youngins on Twitch would rather watch live videogame action. About 18 million U.S. viewers watched the final game of the 2013 World Series. But Twitch drew 32 million for the “League of Legends” world championship last fall, according to SuperData Research. Boom!

SEE ALSO: Cord-Cutting Alert: Americans Watch Just 9% of TV Channels Available to Them

Dish Network chairman Charlie Ergen has seen the handwriting on the wall. The company plans to launch an Internet-delivered pay-TV service, but at a lower price point ($20-$30 per month) to reach the cohort in danger of never paying for linear television.

“It’s a bit like the lobster that gets boiled… which is, you don’t really know you’re dead and boiled until too late,” Ergen said on Dish’s earnings call last month to explain the OTT strategy. (Actually, the thought experiment he means is a frog getting boiled in a pot, but you get the point.)

But if Dish succeeds, and over-the-top TV becomes popular, the company will generate lower revenue — and so will its programming partners. There will be losers, as some channels will be unable to survive the nuclear winter of linear TV’s pared-down future.

For now, the industry continues to double down on the TV Everywhere strategy, although in its lumbering way. Last week, NBCUniversal’s E! launched its first TVE app, E! Now, with live and on-demand access to shows like “The Soup,” “Chelsea Lately” and “Keeping Up with the Kardashians.” And Time Warner Cable yesterday announced that subs now can sign in to Fox’s suite of TV Everywhere services (Fox Now, FXNow, Nat Geo TV and, later in the year, Fox Sports Go). It’s progress, but there are still gaps in the matrix of which content is available to subscribers on non-TV devices.

Some observers have speculated that TV Everywhere is a stalking horse for an a-la-carte, over-the-top future, or that it at least represents a hedge by media conglomerates for that eventuality.

HBO Go could flip a switch and go direct-to-consumer virtually tomorrow. It’s not too big a leap, given that HBO is more or less sold a la carte already. The reason this doesn’t make sense for HBO right now is that the premium cabler benefits tremendously from its distributors’ marketing, billing and delivery infrastructure. If pay-TV hits a deep freeze, HBO is more than ready to spring forward.

But look, the pay-TV industry will not be devastated overnight in a fiery meteor megaton blast. The model as it currently exists is going to be around for a long time.

I’m certainly not inclined to cut the cord anytime soon (guess I’m too old), and there are millions like me… for now. But I doubt my kids will ever buy a big, fat bundle of mostly unwanted TV channels.

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