Everybody likes to be first.

So no one was fazed, really, when in the highly anticipated but slow-motion race to deliver 5G — a next generation of wireless broadband — Verizon Communications breathlessly announced the service’s first North American rollout.

That rollout was limited to an unknown number of participants in four cities, and the technology was proprietary. Still, the PR blitz glanced at an intended target: Verizon senior vice president and chief technology architect Ed Chan said the initial deployment markets were chosen because that is “where cable is today.” One investment banker called it an “existential threat” to the cable industry.

With the top cable operators controlling 65% of U.S. fixed broadband connections, it’s understandable that MSOs are a target. But cable’s dominant position hardly seems under existential threat right now. After the Verizon launch, analysts for CCS Insights declared the 5G threat to cable as “overblown,” predicting that by the end of 2020, 5G fixed wireless solutions will “remain niche.”

At the SCTE/ISBE Cable-Tec Expo in late October, NCTA–The Internet & Television Association CEO Michael Powell dismissed 5G as the wireless industry’s “latest widget,” comprised of “25% technology and 75% marketing.”

Chiming in, CableLabs CEO Phil McKinney recalled his days spent at Teligent in the late 1990s, with the wireless company unable to overcome the obstacles of establishing point-to-point communications in big cities — a big part of 5G’s plan for global urban domination. “I think 5G is going to have similar issues,” he said.

And addressing investors, Charter Communications chief financial officer Chris Winfrey said, “I don’t see anything about 5G that ever makes it comparable to DOCSIS 3.1 or DOCSIS 3.1 Full Duplex, or any capability we have through fixed-line service.”

Who’s right?

The truth is, of course, a lot more nuanced.

5G’s Arrived: Sort of

5G isn’t really “here” just yet. The first 5G-capable smartphones haven’t even hit the market — we won’t see a Samsung Galaxy with 5G-capable chips hit the street until well into next year. (It’s predicted to arrive in March.)

There’s speculation Apple won’t debut a 5G iPhone until 2020. And yes, there are fixed wireless 5G services for the home already out there, but it’s very hard to tell at this point how many people actually have access to them.

Most agree that in years to come, 5G standards will deliver a significant transformation of mobile internet capabilities, just as 4G LTE standards did seven years ago — and 3G did a decade back.

Backers of 5G call it a “foundational” technology that enables brand-new uses, including connected, self-driving cars, smart agriculture, remote surgery, virtual and augmented reality, and other entirely novel ways for us to entertain ourselves. Some boldly predict it will bring the the “fourth industrial revolution.”

HFC Sticking Around

But the vast improvements wrought in network speed and latency won’t necessarily lead to displacement of the incumbent DOCSIS-enabled hybrid fiber coax paradigm, which is itself in the process of evolving into a Full Duplex, 10-Gigabit-per-second future.

And with 5G calling for dense clustering of “small cell” network infrastructure, which can efficiently be delivered by MSOs in many areas, the cable industry could likely play a key role in developing a technology that is disruptive to the wireless business.

Essentially, 5G is an international standard, overseen by the 3rd Generation Partnership Project (3GPP), the body that previously worked to harmonize the 3G and 4G cellular standards. Right now, it’s a largely a collection of well-founded ideas, designed to evolve over time.

Release 15, the 3GPP’s finalized version of its global 5G standard, outlines improved use of higher radio frequencies to deliver faster speeds and lower latency.

Most notably, 5G will deliver far greater speeds than the current 4G standard — or, for that matter, what most wireline services are capable of today. The new standard taps into the so-called “millimeter wave” spectrum, ultra-high frequency radio waves in the range of 24 to 100 Gigahertz that can hold and deliver gobs more data.

Early 5G networks promise speeds as high as 6 Gbps. The standard’s developers believe the technology will one day support speeds as high as 20 Gbps.

Latency will be vastly improved, too, going from 20 to 70 milliseconds with 4G to as low as the ultra-responsive sub-1-millisecond range.

Not only does 5G tap into richer frequency ranges, it includes key technologies that maximize performance, allowing the technology to “bond” up to 16 channels at once, for example. In terms of quadrature amplitude modulation (QAM), 5G can pack as many as 256 data points (256-QAM) into the same wave.

And all sorts of Internet of Things applications are being architected into 5G, with the standard supporting density of up to 200,000 sensors in a 1 million square kilometer area.

For 5G, the big variable is spectrum, with ultra-high frequencies requiring very short-range broadcast of signals, thus the need for so many “small cell” devices. These short-throw, ultra-high frequencies are also prone to all sorts of interference, falling leaves included.

The Federal Communications Commission is actively working to open access to these high frequencies. Last week, the agency voted unanimously to free up spectrum in the upper 37 GHz (37.6-38.6 GHz), 39 GHz (38.6-40 GHz) and 47 GHz (47.2-48.2 GHz) millimeter wave bands.

Although the emergence of — and hype surrounding — 5G is an international phenomenon, few companies around the world can match the exuberance of the top U.S. wireless carriers, Verizon, AT&T, T-Mobile and Sprint.

In fact, Verizon was so eager on 5G that it couldn’t wait until December to launch. That’s when the 3GPP’s so-called 5G New Radio (5G NR) standard was finalized, ensuring that all 5G hardware and software is on the same page.

In October, the carrier launched its $70-a-month 5G fixed wireless service for homes and businesses, with professionally installed customer premises equipment built around Verizon’s proprietary GTF standard. The service is reportedly capable of delivering downstream speeds of 940 Megabits per second, but Verizon said the average is around 300 Mbps. At some point in the future, Verizon has pledged to turn around and upgrade everyone’s CPE and software to 5G NR, truck rolls included.

Not that it appears to be a huge risk at the moment: Verizon hasn’t released a coverage map for the seemingly very limited portion of cities like Los Angeles that have its new 5G service.

Indeed, it may be premature to declare Verizon to be actually out in the market with a true 5G deployment. But the carrier seems intent on investing heavily in the standard nonetheless. Last week, when it announced voluntary layoffs of 10,600 workers, it declared the cost savings earmarked for 5G infrastructure.

Surfing the Broadband Waves

“It’s a totally different way to doing broadband, meaning, instead of having a cord into the house, you have a wireless wave into the house, but the experience is the same,” Verizon CEO Hans Vestberg said at the UBS Global Media and Communications Conference earlier this month. “And I think that’s a big opportunity for us.”

Verizon also plans to deploy a standards-based 5G mobile service next year. Overall, 5G activity should ramp up significantly throughout 2019.

AT&T is about to light up fixed home 5G services in 12 cities, working primarily with technology partners Ericsson, Nokia and Samsung, and mixing a range of mid- and low-band spectrum in suburban areas with millimeter wave spectrum in urban areas. The No. 2 U.S. carrier plans to be ready to go in around a third of the U.S when the first 5G mobile devices hit the market it the first half of 2019.

“I’m probably about as energized about 5G as any technology innovation that we’ve ever deployed,” said AT&T chairman and CEO Randall Stephenson, also speaking at the UBS Global Media show. “It’s such a radical game-changer to have the kind of capacity, performance of a network with — I’m going to exaggerate — but no latency. It’s effectively a no-latency network.”

While AT&T has big consumer-facing plans, IoT will get a big push, too.

“Our early priority for 5G will be enterprise applications,” Stephenson said. “We’re already having a lot of interest in people pursuing robotic plants.”

Nos. 3 and 4 carriers T-Mobile and Sprint, meanwhile, have also announced both home-based and mobile 5G rollouts for 2019. Notably, amid their attempts to sell their $26.5 billion merger to regulators, the pair are pitching the notion that the free market needs a powerful third provider of fixed internet service, beyond Comcast and Charter.

“What’s really resonated with many of the agencies on the Hill and in the states is the fact that you have two going to three,” T-Mobile executive vice president and chief financial officer J. Braxton Carter told attendees at the Bank of America Merrill Lynch Leveraged Finance Conference earlier this month.

“That the two scaled incumbents control two-thirds of the cash flows, the vast majority of subscribers are basically oligopolists to begin with, or let’s just call it a predatory duopoly,” Carter added. “And the creation for a third scaled player … really increases the environment from a two-player market that’s out there.”

While the cable industry doesn’t yet believe the wireless business can launch a true replacement for wireline broadband — at least not without cable infrastructure — there seems to be agreement that the wireless guys are doing a better job right now, marketing-wise, claiming the network of the future.

At Cable-Tec Expo, Powell lamented the fact that cable hasn’t managed to effectively tie its own innovative work with Full Duplex and Extended Spectrum DOCSIS into the national lexicon with a term like “10G” — a reference to the theoretical but well-founded 10 Gbps speeds cable can expect to deliver in just a few years.

Indeed, the cable industry is arguably as far along with these wireline innovations as wireless is with 5G. But we don’t hear nearly as much about them.

Despite reliably delivering on its own, relatively muted technology hype for decades, Powell said that cable is getting “left behind in the nation’s optimistic narrative of the future.”

Us and Them

“We have a better platform to deploy [5G] technology, I think, than the cellular industry does, because we are fully distributed from a high-capacity wireline perspective,” Charter chairman and CEO Tom Rutledge said at the Goldman Sachs 27th Annual Communacopia Conference in September.

“If you think about what 5G is, it is small cells,” Rutledge added. “Small cells mean you needs lots of wired line connectivity to make the small cells work. We think we are actually in a better position to do that than traditional cellular companies. Yes, 5G can be used to compete against us. It is very capital-intensive.”

As Cisco’s annual global internet traffic reports have shown in recent years, video is the No. 1 driver of explosive usage growth.

And with the emergence of 4K-UltraHD, the trend is only accelerating.

According to Cisco’s Visual Networking Index, the amount of traffic crossing the global internet will increase by 153% to around 356 exabytes a month by 2022, with video accounting for 82% of traffic.

By 2022, Cisco estimates that nearly two-thirds (62%) of connected flat panel TVs will support 4K. By that time, the far denser data requirements of 4K-UltraHD resolution will account for 2% of global internet traffic.

Related: Video Continues to Eat the Internet: Cisco Study

Of course, traffic growth will also be driven by the proliferation of internet of things. Also by 2022, Cisco predicts that machine-to-machine modules will be located on 51% of global devices, with their connections accounting for 6% of global IP traffic.

Now matter what’s driving the growth, the spike in internet usage is startling. More traffic will cross the internet in 2022, Cisco predicts, than in the entire span of 1984-2016 combined. And in five years, 60% of the world’s population will be using the internet.

“The size and complexity of the internet continues to grow in ways that many could not have imagined. Since we first started the VNI Forecast in 2005, traffic has increased 56-fold, amassing a 36 percent CAGR with more people, devices and applications accessing IP networks,” said Jonathan Davidson, senior VP and general manager, Service Provider Business, Cisco. “Global service providers are focused on transforming their networks to better manage and route traffic, while delivering premium experiences. Our ongoing research helps us gain and share valuable insights into technology and architectural transitions our customers must make to succeed.”

In today’s data-driven world, hardly a day goes by without new predictions of dramatic increases in streaming video consumption and Internet of Things device proliferation. Whether it’s eMarketer’s prediction of 2.38 billion viewers of video streams or Gartner’s forecast of more than 20 billion IoT devices by 2020, it is clear that a sea change is occurring that will have significant impact on the cable telecommunications networks that deliver the majority of broadband services.

To manage the increased strain on their networks, cable-system operators require granular visibility into subscriber usage that can help them understand the location and cause of broadband bottlenecks. But while tools that identify areas of congestion and high-bandwidth users can proactively solve operational issues, operators are finding that they can also be utilized to generate business results by helping operators reduce expenses and create incremental revenue opportunities.

‘Power Users’ on the Rise
OpenVault data analysis shows that year-over-year usage was up 31.3% in second-quarter 2018 and that the number of “power users” — those using more than 1 Terabyte of data per month — doubled during the same span. As traffic and individual usage increase, the results can be slowdowns in network speeds and an increase in the number of users who are bumping up against the limits of their contracted plans.

Ultimately, this can cause customer complaints that unnecessarily consume operator resources, including call center personnel and even truck rolls, and can lead in the long term to dissatisfied customers defecting to other broadband providers.

When operators gain greater visibility into broadband usage, they proactively are able not only to manage the traffic concerns, but they also have an opportunity to implement business strategies that can modify customer behavior, including a reduction of usage or alignment of customers’ broadband plans with actual consumption. For example, operators could implement usage-based broadband policies or could target high-bandwidth consumers as candidates for upgrades to levels that would deliver satisfactory performance.

Two datasets released this year showed that consumption by non-usage-based broadband households is 12.2% higher than those with usage-based broadband packages, and that non-usage-based broadband households consume 15% more upstream bandwidth than usage-based broadband customers. Thus, the implementation of usage based broadband pricing with data consumption limits can improve overall customer experiences by reducing network congestion, while also opening the door to additional revenue.

On an individual level, operators can leverage visibility into specific user behavior to create incremental revenue opportunities, including not only usage-based billing but also analytics-driven alignment of customer usage with the appropriate broadband package and zero-rating policies. It has been proven that companies that use highly accurate and broad sets of data to replace blind sales calls with intelligent leads are able to identify prime upgrade candidates and drive incremental broadband ARPU by $2 to $3 per household based on a subscriber upgrade rate of 15-20%.

Zero-Rating as Differentiator
Under increasing consideration as well by operators as both operational and business tools are “zero-rating” policies that exempt some OTT video services from monthly usage-based data policies. Zero-rating-specific streaming services can help operators differentiate their services beyond just pricing and speed tiers, especially as wireless providers develop and launch 5G services. The likelihood of broad adoption of this practice has increased as a potential differentiator in the market, resulting in faster subscriber growth and improved retention.

Ultimately, in this fiercely competitive marketplace where data is growing at exponential rates, operators must look for new ways to
meet demand, retain subscribers, differentiate their services and drive profit. For the pioneers who embracing comprehensive approaches to data analytics, the ability to adjust broadband service delivery to meet changing market needs is enabling them not only to deliver high quality service, but also to ensure customer satisfaction and bottom-line success. )

Mark Trudeau is founder and CEO of OpenVault.

Roseanne, depicting a working-class family and its President Donald Trump-supporting matriarch, was television’s big story last season, averaging nearly 19 million viewers on a live-plus-seven-day basis.

Roseanne Barr’s racist tweet led to its cancellation, but the network wasn’t done with the idea: The Conners premieres Oct. 16, and ABC hopes the gang can do some semblance of the robust ratings Roseanne garnered last year.

Ignoring the fiasco of the tweet, other networks are chasing The Conners into Middle America, hoping to win viewers with heartland themes built around the everyman as hero: Last Man Standing on Fox; NBC’s stacked Chicago shows on Wednesdays; FBI and God Friended Me on CBS; and a handful of series on the streaming networks.

“When something like Roseanne happens, the industry as a whole looks to replicate that in some way, shape or form,” media consultant Bill Carroll said.

Very few network executives will ever concede to targeting one section of the country or the other, and anyone on the broadcast side of the business is thinking broad appeal for anything on air. But these days, the aim seems to be at the very “flyover” states once ignored by tastemakers. And while series on the streaming networks have for years focused not so much on vast appeal, but on select viewers interested in gripping stories, some on the streaming side say their shows, too, shoot for viewers in the heartland.

Before Tom Clancy’s Jack Ryan premiered on Prime Video Aug. 31, placing Clancy’s ace analyst in the heat of the Middle East, showrunner Carlton Cuse said he saw Ryan as a “classic American hero” when TV’s defense-minded antiheroes, on the likes of Homeland and 24, bend the rules to complete their missions. “He’s a guy with morals, and a sense of altruism and patriotism,” Cuse said.

Jack Ryan aims to depict the federal defense agencies, such as the CIA and FBI, in a noble light when many are quick to criticize them, Cuse added. Patriotic civil servants play well in Middle America.

“It’s the type of show that’s not made for TV critics, it’s made for viewers,” he said. “We think it has broad appeal — and appeals to a whole section of the country.”

Same goes for drama One Dollar, which premiered Aug. 30 on CBS All Access. The show, which tells the story of multiple murders through a dollar bill that changes hands among connected characters, is set in Pittsburgh, where showrunner Craig Zobel said it can depict the city’s current class clash between the big brains of Carnegie Mellon and Uber and Pittsburgh’s steel-production past.

“The idea was to set something that wasn’t New York or Los Angeles,” he said. “It’s indicative of another part of America we don’t see all the time on TV.”

A year ago, Amazon chairman and CEO Jeff Bezos said he wanted a global hit or two out of Amazon Studios, something akin to Game of Thrones. “We’re a mass-market brand,” then-studio head Roy Price told Variety. Yet Amazon’s big fall release, Matthew Weiner anthology series The Romanoffs, which premiered on Prime Video Oct. 12, is hardly mass-market. Its pilot, set in Paris (with subtitles), feels like an independent film, running nearly 90 minutes and featuring a main character with racist tendencies.

Networks Soldier On

President Trump’s surprise win for the White House gave voice to overlooked voters in the heartland, and it appears to have prompted networks to make sure they don’t overlook them. The 2017-18 broadcast season featured a glut of military themed programming, including SEAL Team on CBS, Valor on The CW and The Brave on NBC. At the time, The CW president Mark Pedowitz downplayed any notion of programming to red or blue states.

“It doesn’t matter what the attitude of the country is,” Pedowitz said. “If it’s right, people will watch it.”

People, for the most part, did not watch. SEAL Team returned this season, while the other shows did not. (History also cancelled military drama Six, about Navy SEALS, after two seasons this past summer.)

Do red states and blue states actually like different programs? A study from E-Poll showed that Democrats’ favorite show for the 2017-2018 season was Game of Thrones, followed by How to Get Away With Murder, This Is Us, Brooklyn Nine-Nine and Broad City. Chicago Fire, Chicago PD and Chicago Med also made the top 10, as did Stranger Things.

Republicans favored Grey’s Anatomy, How to Get Away With Murder, Supernatural, This Is Us and Criminal Minds. The Walking Dead, at No. 6, was the lone non-broadcast show on the GOP list. Roseanne came in at No. 71 among Democrats and No. 31 among Republicans.

Another E-Poll study showed viewers who are Democrats prefer shows that are “sexy, edgy, emotionally involving, ethnically diverse or have strong characters.” Republican viewers, for their part, like programs that are “family-friendly, funny, plot-driven or have storylines that involve ‘good vs. evil.’ ”

Everyone’s Invited

Similar to network executives, few showrunners will say they are targeting a certain section of the country. New ABC comedy The Kids Are Alright, which leads out of The Conners, shows a family of eight boys growing up with ultra-conservative parents in the early ’70s, against the backdrop of the Vietnam War and other social strife. “I haven’t thought, this is a red-state show, this is a blue-state show,” creator/showrunner Tim Doyle said. “I haven’t approached it as, I’m reaching out to this audience or that audience.”

Neal Baer, showrunner on drama Designated Survivor — which will premiere on Netflix after two seasons on ABC — said people are too complex to program to individually. “You have to be really careful about saying you’re going to pitch to this group or that group and how that affects your storytelling,” he said.

Network executives don’t love talking about red states and blue states watching their shows, either. After all, it’s entertainment, not cable news. Andy Kubitz, executive VP, programming strategy, ABC Entertainment, said Roseanne wasn’t so much about politics as it was about social issues, seen through the eyes of working-class folks.

“I don’t believe the Roseanne conversation has much to do with red state and blue state,” he said. “The first episode touched on politics, but the rest was about real issues in America that no one else is talking about on television.”

Among the broadcast rookies, FBI, which premiered Sept. 25, shows the inner workings of the bureau’s New York office. Last Man Standing started Sept. 28. Airing for six seasons on ABC before it moved to Fox, it’s about a politically conservative guy, played by Tim Allen, who works for a sporting goods chain. God Friended Me, which debuted Sept. 30, is about an atheist podcaster who is friended on social media by God.

If The Conners looks crafted for the heartland, NBC’s comedies, which include Will & Grace, whose reboot was birthed by a video the four cast members did about Trump weeks before the presidential election, are designed more for urban viewers. Pedowitz said CW hit Supernatural connects with a broad swath of the country, while Crazy Ex-Girlfriend appeals to niche viewers.

“We’re broadcasters — we’re designed to hit the whole country,” he said. “But within the whole country you’re going to hit pockets.”

The Murphy Brown reboot on CBS reaches out to both ends of the political spectrum. The premiere saw Brown, who comes out of retirement to host a cable news show, spar with President Trump on Twitter. It also featured a cameo from Hillary Clinton, who interviews to be Brown’s secretary. (“For four years I was the secretary of a very large organization,” said Clinton.)

Murphy Brown also features Brown’s son, Avery — recall that Dan Quayle derided Murphy Brown for “mocking the importance of fathers” for depicting a single mother back in 1992 — hosting his show on a rival conservative network, the Wolf Network, that features chats with regular Americans in coffee shops and bowling alleys.

Executive producer Steve Peterman, who also worked on the original show, told The New York Times the series came back because Trump is in the White House. “If Hillary Clinton was elected there’d be no artistic reason for this show to be on the air,” he said. “But because of the election, and because the position the press is now finding itself in, there were so many reasons for this show to come back.”

Yet the idea of creating a show based on what the country appears to be feeling and thinking doesn’t quite line up with the labor-intensive, time-consuming nature of producing television. Preston Beckman, former senior strategist at Fox and chairman of media consulting outfit The Beckman Group, mentions Fox brass meeting after the Sept. 11, 2001 terrorist attacks to focus on how best to program to the wounded nation, before deciding they’d never be able to react in time.

“You make decisions today and implement them one or two years down the road,” Beckman said. “Who knows where the country’s head could be then?”

Consumers may claim they don’t care which network carries the shows they want to watch, but branding still plays a key -- if slightly subliminal -- role in the choices they make, according to Hub Entertainment Research.

Citing info from past studies, Hub principals Jon Giegengack and Peter Fondulas told an audience at the Media Insights and Engagement Conference in Miami on Tuesday (Feb. 6) that 41% of consumers they surveyed said network branding doesn’t matter. But a deeper dive proved the opposite. The information was gleaned from online surveys of between 1,774 and 2,214 individuals aged 16-74 who watch at least 5 hours of TV per week.  

According to Hub, when given the chance to build their own bundle from a list of 52 networks participants proved extremely selective. For example, when told that money was no object, they chose just 19 of the 52 networks, with the four major broadcast networks, Netflix, HBO and ESPN topping the list. And when pricing information for each network was included, that number dropped further to just 9 of the 52 networks available, with Netflix on top followed by the four broadcasters, HBO and Amazon Video.

Branding played an even bigger role when participants were given descriptions of hypothetical TV shows across several genres, with interest varying dramatically depending on which network the show was on, Hub said. According to the study, Netflix generated the highest interest in a competitive reality show the researcher tested, even though the brand is not known for that genre. About 47% of participants were extremely or very interested in watching the reality show on Netflix, compared to 30% if it was on The Travel Channel.

Hub’s conclusion was that as consumers are faced with an ongoing deluge of content, it is critical that distributors give them access to brands they care about without forcing them to sift through the ones they don’t care about. The company cited Amazon Channels as one distributor that is following that line.

“These findings suggest that viewers have developed clear expectations for the kinds of viewing experience different brands—networks and SVODs—will deliver,” Giegengack said in a statement. “This new brand paradigm has wide reaching implications for brand marketing and distribution.”

Cable operators value ESPN the most among the networks they carry, according to a Beta Research study.

According to the Beta study, which surveyed 103 cable operators by telephone between August and October, ESPN was ranked at the top of basic networks by average perceived value at $1.14 per subscriber per month. That’s less than one-sixth of the estimated $7 per subscriber per month the network receives on average from pay TV providers, according to SNL Kagan. Sister networks ESPN 2 placed second with an 89-cents per sub perceived value followed by NFL Network (78 cents); Fox News Channel (76 cents); Disney Channel (75 cents); FS1 (70 cents) and TNT (70 cents).

USA Network placed seventh at 67 cents, followed by the Discovery Channel, Food Network and NBC Sports Network at 65 cents each.

ESPN did fare slightly better than last year, when operators participating in the study said it was worth about $1.03 per subscriber per month. All the other networks were also valued at substantial discounts to their average affiliate fees.

Disney and ESPN Media Networks were tied for first place when respondents were asked which channels were “very helpful” in selling TV Everywhere and video on demand services, with 77% of total operators picking the programmers. Discovery was a close second with 63%, followed by Fox Cable Networks with 62%. 

According to Beta, 86% of the operators surveyed had 10,000 or more subscribers; 56% had 100,000 or more subscribers and 50% had 200,000 or more subscribers. For perceived value, operators were asked to estimate the amount per month per subscriber that the network was worth to their system.

As the television landscape continues to change and redefine itself, the number of channels viewers watch and how long they watch them continues to decline.

The Nielsen Total Audience Report for the second quarter of 2016 found adults watched an average of four hours and nine minutes of live TV, a two-minute decrease from Q2 2015. While the decline was not as precipitous as the eight-minute falloff from Q2 2014 to Q2 2015, live TV viewing continued its steady decline in the face of increased competition.

As live TV viewing declines, so does the percentage of channels viewers actually watch, according to the report. That may seem like an obvious conclusion, but in today’s changing television marketplace, nothing can be taken for granted.

On average, adult viewers watched 9.6% of the television channels offered to them on traditional cable lineups — down from 10.6% in May 2014.

African-American viewers, who watch the most television of any group, viewed on average 11.3% of received channels, flat from the same period last year, according to the report. The percentage of channels Hispanics watched year-to-year climbed to 9.1% in 2016 from 9.0%in 2015, while Asian-American channel viewing percentages plummeted to 7.4% from 7.7% in the same period.

Adult viewers with access to subscription video-on-demand channels such as Netflix and Hulu watched, on average, 1.2 fewer television channels, according to the report.

Nielsen’s data bolsters the argument for rolling out skinnier channel bundles with fewer cable networks than the traditional basic-cable lineup.

If the current viewing trends continue unabated over the next few quarters, the drumbeat that says less is more will only grow louder.

Rather than focus on the so-called “skinny bundle” and attempt to undercut traditional pay TV provider pricing, Sony is targeting a coveted, much larger demographic with a heavier offering that will weave in several bells and whistles, including a fancy cloud-based interface and a massive cloud DVR.

The no-contract service, called PlayStation Vue, launched last Wednesday (March 18) in three markets — Philadelphia, New York and Chicago. It’s starting off with three tiers that deliver a mix of at least 85 broadcast and cable channels per market: an entry-level “Access” tier for $49.99 per month that includes the broadcast feeds of CBS, Fox, NBC, Cozi TV, MyNetwork, Exitos and Telemundo; a “Core” service that factors in regional sports channels for $59.99 per month; and an “Elite” service for $69.99 per month that includes all of Access and Core, plus more than two dozen additional lifestyle, music and family-themed channels. Subscribers still need broadband to get PS Vue in the door.

While Sony was able to lock in deals with AMC Networks and Turner in time for the launch, still missing in action are ESPN and ABC, as well as premium channels HBO, Starz, Showtime and Epix.

Sony is in distribution talks with Disney and several other programmers, Dwayne Benefield, vice president and head of PS Vue, said in a briefing in New York. He said Sony expects to launch the service to more markets later this year.

While Dish Network’s new Sling TV service and one reportedly being developed by Apple are lightweight bundles tailored for cord-cutters, Sony is also targeting 18-34 year-old gamers, a coveted demographic that includes many who already take a pay TV service.

“We think the service appeals to both groups,” Benefield said. During the beta trial, PS Vue users averaged three hours per session, he said. But PS Vue might need to differentiate itself more from the legacy multichannel video programming distributor (MVPD) competition, Bruce Leichtman, president and principal analyst of Leichtman Research Group, said. “It appears to be a traditional TV service with a different delivery.”

Leichtman said he believes the service will appeal most to the so-called “cord-nevers” who have eschewed TV offerings from telcos, MSOs and satellite providers.

The cord-never market also is getting more challenging as cable operators try to attract new customers with low-cost introductory bundles.

For example, Comcast, which will compete with PS Vue in Philadelphia and Chicago, is pitching a “starter” triple-play package that includes more than 140 digital channels via its X1 platform, 25-Mbps broadband and voice service for $89.99 per month. The catch is that the price is good for 12 months, and customers must make a two-year commitment.

Sony’s service will also have to contend with usage-based broadband policies. Comcast currently has no such policies in place in Chicago or Philadelphia, but in select markets, including Atlanta, it’s testing a plan that applies a soft monthly cap of 300 Gigabytes per month. When customers exceed that threshold, they are subject to a charge of $10 for each additional bucket of 50 GB.

To avoid that, Sony, along with HBO and Showtime, have held talks with Comcast and other MVPDs about delivering video over managed IP connections that don’t mix with spectrum dedicated to high-speed Internet services, The Wall Street Journal reported. In recent years, Apple has held similar talks with Comcast, Time Warner Cable and Liberty Global, multiple industry sources told Multichannel News.

Quick Facts About the PS Vue’s Debut

Markets: New York, Chicago and Philadelphia

Supported Devices: PlayStation 3 and PlayStation 4 consoles, with the iPad on deck. Sony plans to extend access to connected devices within and outside of its product ecosystem, but has not yet identified them. One possible candidate is the PlayStation TV, a $99 gaming/streaming device that debuted in North America last fall.

Navigation: Cloud-based interface offers several ways for users to browse for and find programming, including “My Shows” and “My Channels” features that create personalized lists of favorites that can be pinned to the screen by clicking on the controller’s “R1” button. The UI also comes with an algorithmic recommendation engine and a “Featured Shows”listing curated by Sony and its network partners.

More Video: PS Vue features a VOD library, a “look back” service for prior episodes of certain TV series, and a cloud DVR that will allow users to record up to 500 individual programs for up to 28 days.  

Fusion will partner with the USC Annenberg School for Communication and Journalism to offer working fellowships to graduates specializing in specific journalistic areas.

The fellowships will fall within three units; digital storytelling, investigative reporting and documentary production, according to the network. As part of the fellowship program, three recent graduates will be hired annually to work for the pop culture news network Fusion, a joint venture of Univision Communications Inc., and the Disney/ABC television network. 

Fellows will work for an initial six-month period at either the network’s Miami headquarters or Los Angeles production offices and will be assigned to one of Fusion’s production units.

“Millennials are the most socially and culturally connected generation, so we have to think beyond the traditional modes of journalism,” said Fusion CEO Isaac Lee in a statement. “By creating a pipeline of innovation between Fusion and the world’s best journalism schools like USC Annenberg, Fusion can continue to push the envelope and develop new ways to communicate with this young, diverse generation.” 

In the increasingly bitter and contentious carriage negotiations between cable programmers and distributors, smaller independent operators are discovering a new tactic: dropping networks completely from their packages.

Some are doing what was once unthinkable: dropping video altogether.

In recent years, operators have typically come away from license-fee imbroglios more battered than the programmers. Content companies threaten or follow through with blackouts. Customers get mad at their distributors, complain about price increases and defect to another provider. This pattern usually ends with operators caving in to programmers’ price increases.

But a funny thing has happened on the way to the negotiating table: Consumers aren’t automatically blaming distributors for hefty rate hikes, as in years past. Moreover, they’re not abandoning their service providers when channels are dropped, according to industry players.

And that’s given distributors the confidence to channel Peter Finch’s character Howard Beale in the 1976 movie Network, who shouted, “I’m mad as hell and I’m not going to take this anymore!”

Operators are increasingly throwing their own punches by refusing to pay higher prices and dropping channels when negotiations stall or go sour. The biggest, most recent example of this was clearly evident earlier this year when several members of the National Cable Television Cooperative dumped Viacom’s stable of networks — including MTV, VH1, Nickelodeon and Comedy Central — rather than fold.

Subscriber attrition in the wake of this fight, and others, has been surprisingly inconsequential, independent operators said, and the threat of an embargo doesn’t hold the same kind of terror it once did. The NCTC, for example, began helping its 950 small- and midsized members prepare for upcoming negotiations and their outcomes about a year ago, president Rich Fickle said.

Schoen Media Group, a Los Angeles-based marketing and sales consultancy, set up a number of websites operators could use to combat programmer propaganda. The NCTC helped the MSOs frame their arguments and provided market research resources to better gauge public perceptions and desires.

What has brought these Davids so much confidence against the programming Goliaths? Desperation. With the wholesale cost of programming rising faster than retail prices, the decision to drop channels all comes down to economics.

“The cost of programming is unsustainable,” Fickle said. “We’re at the point where operators have to pick their poison — pay the increases or drop the programming. I think we’ll see more operators drop programming.”

At the Independent Show last week, virtually every panel and private conversation revolved around the skyrocketing price of programming and the inability of small and midsized cable operators — who do not get the same volume price discounts as giants Comcast or Time Warner Cable — to pay for it.

Cable operators including Cable One, Vyve Broadband, ImOn Communications and Cedar Falls Utilities chose to chuck Viacom’s stable of networks earlier this year rather than agree to a new, expensive contract. CFU in Cedar Rapids, Iowa, chose to dump Viacom’s channels after a customer survey answered by one-third of its subscribers. By a margin of more than 2-1, survey respondents said they would rather replace Viacom’s programming than face a rate hike of about $3 a month, CFU said in its company blog.

Viacom declined to comment on the matter. To be sure, the bulk of NCTC’s members opted to retain the programming company’s channels amid new contract terms, according to Fickle. While an exact number of operators that chose not to renew their deal with Viacom was unavailable at press time, Fickle and USA Communications president Chris Hilliard both pointed out that many of the operators that chose to eschew a new Viacom deal generally serve rural areas with older populations rather than the younger demographics Viacom’s programming tends to attract.

VIDEO DROPOUTS

Some operators are actually dropping their entire video offerings as costs rise and margins shrink. When it became apparent to USA Communications’s Hilliard and his partners that they were spending 80% of their time and financial resources on the video-distribution part of their business for nominal returns, it didn’t take long for them to shelve the entire product line in some markets.

Today, USA Communications has a fraction of the video customers it had at the turn of the century, counting about 5,000 video customers in 25 markets. But the company is more profitable and has expanded its footprint and business model to include a fiber-to-the-premises commercial services offering.

Exiting the video business or dropping popular services takes some courage and will to fight, but it can pay off. The first two weeks are the most brutal, Hilliard said. It doesn’t matter whether it’s an obscure network few people watch or a whole channel lineup. But providing customers with a roadmap of alternatives, as well as a clear explanation of why those channels are being dropped, eases the pain for both customers and employees.

“It’s disruptive, there’s no way of getting around it,” Hilliard said. “But as long as you replace that programming with something comparable, you’re good. The Internet has helped.

“When you drop programming you always take a hit and lose some customers,” he added. “But the increased costs of the programming are generally more than the loss of the handful of customers. And the rest of our customers don’t have to bear the burden of the increases.”

Making sure there are options for customers is crucial for an operator during blackouts and programming displacements, Hilliard said. Cable One filled the empty pots on the dial with BBC America, Sprout, SundanceTV, IFC, Investigation Discovery, TV One, National Geographic Channel and TheBlaze. CFU added Great American Country, Disney Junior, MeTV, MAV TV, FXX, WE tv, Investigation Discovery and AXS TV to offset the gaps left by dropping Viacom’s services.

PRICE SHOPPING

Vyve replaced its bundle of Viacom networks with a slate of networks from Entertainment Studios, which distributes six high-definition channels — Cars.TV, Comedy.TV, ES.TV (similar to E!), My Destination.TV, Justice Central, Recipe. TV and Pets.TV. The channels are either free or have a nominal monthly fee, according to Entertainment Studios chairman and CEO Byron Allen.

“I believe we will see more operators drop expensive and bundled channels,” Allen said. “Advertisers love cable programming and there is nothing — except for sports — that can’t be reproduced for less money. Consumers have always gotten that. Operators are now getting it and they are feeling empowered to do it.”

The key to successfully navigating the morass of a blackout or nasty contract negotiation is guts, preparation and execution. Todd Schoen, president of Schoen Media Group, who became familiar with how programmers gear up for contract while an affiliate representative with Fox Networks, also teaches distributors how to avoid potholes and crashes. These entanglements can be messy, long and ultimately damaging long-term if not played out correctly, he said.

Viacom’s latest gambit includes denying cable customers access to its websites. But that doesn’t appear to be working in the content company’s favor at this point, according to American Cable Association president Matt Polka.

In a May 30 column, The Joplin (Mo.) Globe columnist Joe Hadsall called Viacom “cowardly” for blaming Cable One for the blockade rather than explaining why it wasn’t allowing the operator’s customers access to its sites. In the past, Hadsall had repeatedly bashed Cable One for raising rates and forcing expensive programming bundles on its customers.

These types of maneuvers have traditionally helped push operators into signing new deals. But those efforts don’t look to be as successful as they’ve been in the past. Why?

Hilliard believes that’s partly because customers have more outlets to watch their favorite shows. With the proliferation of Netflix, Amazon, Apple TV and Hulu, consumers aren’t locked in to just getting entertainment from their pay TV provider — and cable programmers have become less formidable at the negotiating table.

MCTV in Massillon, Ohio, hasn’t jettisoned its video business just yet, but it is losing its stature as the most profitable and important segment, said Robert Gessner, MCTV’s third-generation CEO. In MCTV’s marketing materials and on its website, Internet access is now the first product offering listed, followed by video and phone services.

Educating customers and explaining why networks are added or dropped helps consumers understand the issues when a blackout or deletion occurs. Gessner has been painstakingly explaining the intricacies of the industry and MCTV’s decisions since the mid- 1990s. When the company dropped the NHL Network, for instance, it provided step-by-step instructions on how to sign up for the National Hockey League’s “Gamecenter Live” over-the-top package of out-of-market games. MCTV offered deals on its Internet services and explained — in detail — why the channel wasn’t being carried on its video lineup.

The tactic worked beautifully, Gessner said. The operator lost virtually no customers. MCTV’s hockey fans were happy because they could still see games. The bulk of the company’s customers were pleased they didn’t have to pay more for programming they didn’t care about. And MCTV added a bunch of new broadband customers.

Steering customers to alternative video sources is a strategy many operators are deploying these days, regardless of whether they are in the middle of contract negotiations. Some operators are opting to ditch the video business altogether and instead teaming up with satellite providers DirecTV and Dish Network. It’s more profitable to take the commission from those companies and focus their attention on offering high-speed data and phone services, Hilliard said.

“This was an economic decision for me,” said cable veteran Joe Ogren, founder and managing partner of SpeedConnect, which decided to give up on video and be a Dish reseller. “The cost of providing video to our customers was about what we could charge for it. It made sense to expand our Internet offerings and migrate our video customers to Dish. Bandwidth is so valuable and people want a lot of it and they want it to be fast.” SpeedConnect currently offers 4G wireless services bundled with Dish to about 50,000 customers in eight states.

Many operators see their role increasingly as a provider of a gateway for many different digital services, focused on helping the customers manage all the complexity in their homes.

“We see local operators working with OTT providers and other local competitors,” Fickle said. “There may be all new business partnerships that are formed in the wake of these programming disruptions and that’s all good for the consumer. They get more choice and more flexibility. And the operators do too.”

While MCTV’s profit margin on video is still higher than on broadband, Gessner said, the day will come when that’s not the case. In a report he created for regulators and others, he wrote that wholesale costs for the lowest level of video service will increase by 11.5% in 2014. And that number is expected to increase a whopping 400% by 2020, Gessner wrote.

The bundled model worked for so long that now that it’s broken, it’s hard to break the pattern, Colleen Abdoulah, CEO of WideOpenWest, said. “We simply didn’t do a good job of explaining to our customers why their rates were going up and what they were getting for it,” she said. “That’s when things went south for distributors. We had to come from behind to educate our customers. We are now doing a pretty good job of educating our customers on how this whole business model works. I think this will be really consumer-driven in the future. If programmers don’t get smart about knowing what customers want, their financial model will be broken.”

WOW wants to provide its customers with what they want and that increasingly means offering content via its broadband network rather than bundled TV networks, Abdoulah said. The company is focusing most of its attention on WOW’s network and infrastructure.

That’s a strategy many operators have struggled with in the past. But now, rather than pay big bucks for programming, those distributors are able to spend more on their plant so they can deliver the most robust broadband service in their markets, Fickle said. It’s a reallocation of dollars that should benefit operators and customers going forward, he said.

That’s not to say the bundle no longer has any value, Abdoulah said.

“All the cable operators I know are very bullish on the industry’s prospects,” she said. “We’re focused on infrastructure and technology but we need to meet our customers’ needs.”