If you want to make any TV executive squirm, just ask them what they’re going to do about “cord cutting.”
That's industry speak for when cable watchers cancel their subscriptions in favor of online alternatives such as Netflix, Hulu, and Amazon Prime. Though cord-cutting isn’t causing serious problems for traditional TV networks yet–-only about 5% of U.S. homes have opted out so far--the future looks bleak, especially when you look at the demographics of who’s doing the cutting and why.
Consider this: The highest volume of cord cutting comes from digital natives, meaning young people. And unless our culture for some reason gets less technologically advanced or people stop having babies, we will continue to see the number of digital natives rise dramatically and spread out over the entire demographic spectrum. This means there will be an exponential rise in the number of people with the cultural and technological awareness to walk away from cable subscriptions or never get one in the first place. Meanwhile, we’ve got iPhones, Androids, tablets, and apps to distract us, and soon we’ll have Google Glass. Just imagine what will come along in the next five years to steal our attention away from television sets.
So, cable companies are struggling. Time Warner CEO Glenn Britt recently pointed out that while video programming costs have grown 32% in the past four years, his company has only raised its average per-user revenue by 16% during that same period. Which means that even as Time Warner raises cable bill rates, they’re not able to keep up with the cost of the rights to broadcast content. This is because they're facing increased costs from traditional TV networks that have more leverage in negotiations with providers as long as they carry popular on-air programming and sporting events. Traditional TV networks know that many people will simply not subscribe to certain cable or satellite service providers if it means they do not get to watch Mad Men or the New York Yankees. These individual units of programming move hordes of subscribers.
With sports programming being so valuable, it’s easy to understand why cable and satellite providers are squeezing as much money out of cable and satellite operators as possible. As a result, cable and satellite operators need to recoup their losses by raising the bills on the consumer. Cable bills have more than doubled over the last decade, and the market research firm the NPD Group estimates they will rise to $200 a month by 2020. Meanwhile, DirecTV, the largest U.S. satellite TV operator, has started charging a separate monthly fee to consumers in regions where there is a higher volume of regional sports networks. Verizon Communications Inc. is going to start charging new customers $2.42 a month for those channels. This is truly an anti-consumer market.
Which brings us to the UFC. With all the brashness of youth and the enthusiasm of early spring, the MMA promotion is addressing the problem in a revolutionary way. The UFC's new subscription-based YouTube channel, UFC Select, which launched last month, breaks just about every rule governing how sports programming is monetized by democratizing the content-access process and skipping over the traditional (and costly) operator/provider model.
Every week, the channel adds eight new archived fights, new episodes of original UFC shows, and a full live event to its playlist. The paid subscription channel exists alongside the UFC’s free YouTube channel, which still hosts Dana White’s vlogs, weigh-ins, press conferences, and the UFC Countdown shows. The channel costs $5.99 a month.
So, rather than try and fight off the inevitable, the UFC has decided to embrace the Internet and the reality that cable companies are slowly being murdered by it. Sure, the UFC made its major deal with FOX and will be heavily featured on the new FOX Sports 1 channel, which is good for exposure, but they’re also making it much easier for people to engage with their content without the need for a cable subscription by embracing the Internet in ways no other sports league ever has. This approach started two years ago, when the promotion started giving some of their live sports programming away for free on Facebook, trading easy money for social media loyalty. This is a move the four major American sports leagues--the NFL, NBA, MLB, and NHL--have yet to make. And although the four “major” sports have all made major digital pushes--offering streaming, replays, and other online services--none of them has made original programming as accessible (or as cheap) as the UFC. If that remains the case, the UFC will not only be positioning itself as the fastest growing sport of today but the fastest growing sport of tomorrow as well.
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