The early reviews of Google Fiber are in from Kansas City and one of the most attractive features of the service seems to be how it makes Netflix irresistible. The buffering annoyances that consumers take for granted vanish as Google Fiber feeds movies and shows instantly to eager Silicon Prairie dwellers. What’s more, the recently launched Google Fiber TV app offers video on demand for iPad. This direction is fascinating because of the hottest trend in US consumer behavior: broadcast television audience collapse.
TV show audiences have been falling for a long time, but recently the decline has turned into a plunge. According to Goldman Sachs, ratings in the 18-49 year demo dropped by a hideous 17% last winter, the steepest drop ever. “American Idol” is losing nearly 25% of its audience in a year. Most of the big new shows have been disasters and old staples like “Survivor” and “Dancing with Stars” are in free fall.
Everyone has long known that the broadcast dinosaurs are in trouble but it is only now becoming clear just how rapidly they are losing their grip on consumers in the United States. This coincides with rapid growth of time spent on mobile apps: American iPhone owners now waste two hours per day on apps and annualized growth of daily engagement still tops 30%. But it also opens up completely new vistas for Netflix, Amazon, Google and Apple when it comes to video distribution.
It now looks like American demand for video on demand is far bigger than was estimated just a year ago. The accelerating erosion of broadcast television frees up consumer time and hits ad revenue of CBS, Fox and their peers. This in turn will limit their ability to create big-budget shows that has been their last line of defense. That cycle is starting to turn just as challengers with serious money to burn are pushing into content creation.
Netflix had a hit with its $100 million “House of Cards” series that debuted during the quarter when Netflix beat Wall Street consensus handily. The buzz around “Arrested Development” is deafening and will likely raise the profile of Netflix original programming considerably. It is only a matter of time before deep-pocketed Google and/or Amazon take the plunge and start shoveling big bucks into television production. Amazon is already previewing a dozen pilots it has produced, trying to gauge which ones to take into full production.
Google Fiber and its ilk may be the final straw that will break the back of broadcast television. Once high-speed video downloading becomes widely available, instant access to VOD services will make them even more appealing. What Netflix showed with “House of Cards” is that it’s possible to take a B-list star, create a high concept show around him and reap tons of media coverage. Soon enough we will see Alicia Silverstone and Jeff Goldblum starring in an Amazon show discovering the rebirth of a Bal-Ammon cult in SARS-ravaged Fargo.
What makes this possible is the complete paralysis of the broadcast dinos. All the majors are frozen in terror, repeating old behavioral patterns that turned self-destructive years ago. NBC spent the annual defense budget of Mauritius to promote “Ready for Love,” a tired Bachelor clone. ABC is going to build its autumn slate on “Scandal”, “Revenge” and “Betrayal,” as well as a hasty spin-off of its fading “Once Upon a Time” franchise. ABC also handed Robin Williams a comeback vehicle. Sensing desperation, audiences are tuning out in disgust.
Google is well-positioned to turn Google Fiber into the core technology enabling instant VOD access; Netflix is pioneering the new production/distribution logic; Amazon is sneakily exploiting its Prime service to slip video consumption to its customer base. The big question mark here is Apple. Why isn’t Apple being more aggressive in attacking the dying broadcasting giants? Is it so wrapped up with its smartphone and tablet challenges that it does not have the time? Or is there some grand design being developed in secret that will stun the world in few months?