December 11th, 2008
This Recession, The Internet Is More Important Than TV
In past recessions, downcast consumers could still be counted on to come home, plunk down in their chairs and watch TV, to escape from the clutches of economic doldrums. And pay their TV bills, because cable at home was cheaper than going out to the movies. The Internet? What was that?
Not the case, this time, according to the chief operating officer of one of the nation’s most successful cable system operators.
The Internet is more important than TV.
In a “difficult economic environment,’’ smart people in this downturn are more likely to cut out a subscription to TV service, than Internet service, Tom Rutledge, the chief operating officer of Long Island-based Cablevision Systems Corporation said at the UBS Global Media and Communications Conference in New York. There, he said:
“If you think about the Internet and its utility today, in terms of looking for a job even, it’s really something you have to have. If you ask most sophisticated people, would they rather live their life without television or without the Internet, they’d probably give up television, before they’d give up the Internet.”
The logic is clear. Since the dotcom bust in 2000 and 2001, the Internet has greatly increased its utility to users in everything from text communications (instant messaging, Twitter) to voice communications (voice over Internet protocols, Skype) to job searching (Monster, CareerBuilder, HotJobs) to stuff searching (CraigsList, eBay) to opinion-making (Huffington Post, Politico) to video (YouTube, Hulu, NetFix streaming).
By the time the next downturn arrives, seven years hence, it’s conceivable that many of Rutledge’s customers will only want an Internet connection to Cablevision. That one channel will give them all the “Triple Play” of communications they might want: voice calls, data services and video viewing.
The fact that the Internet has replaced TV as the most important medium to “sophisticated” people is not reflected yet in many benchmarks.
Households now spend 142 hours a month watching TV. That’s up 5 hours from a year ago. By comparison, Nielsen says they only spend 27 hours with the Internet. BTL interpretation: Hours spent on the Internet in the office, in the airport and on the move don’t get counted.
And a lot of people want to take a break from the Internet, when they get home at night.
Cablevision’s own numbers show the Internet becoming a rival in almost all households to TV. At the end of 2000, the company had only 238,500 cable modem (aka Internet) customers. That amounted to about 11.9% of households served.
Now, Rutledge told UBS that Internet penetration essentially half of all households passed. Its TV service, with much longer roots, is taken by 66% of all households passed. (And, don’t look now, but voice services – aka its version of telephony – is now subscribed to by 40% of households that it could possibly serve.)
Rutledge does not speak lightly. He is able to think outside the (set-top) box, like Steve Jobs. Rutledge, for instance, is the executive who figured out that it will be smarter for the cable customer and the cable company if the digital recording of TV shows is put inside the network. That way, there are no truck rolls to the home to put boxes in place. And services can be updated, at any time, for all households, without anyone having to waste time waiting for someone to show up at the door. Don’t’ be surprised, for instance, if the TV in your living room learns to stop playing the show in front of you when you hear your cable phone ringing and you pick it up. But picks up right where you left off when you hang up.
He also made high-definition TV service free to Cablevision customers and is putting free wifi access to the Internet throughout the Cablevision footprint. So even when you’re not at home, you’re still on his network. With no effort.
So to hear a cable operator now say that, after 60 years, the Internet is more important than TV to most intelligent customers makes you sit up and take notice.
Yet Rutledge’s basic point is pretty hard to argue: If you are out of work, are you going to turn off the service that provides you all the possible job listings out there that might resuscitate your household income? Or are you going to instead keep the service that brings you “Biggest Loser,” “Kitchen Nightmares” and “Dirty Sexy Money” on a given night?
You pick.
Tom Steinert-Threlkeld is editor-in-chief of Securities Industry News, as well as a long-time media, technology and business journalist. See his full profile and disclosure of his industry affiliations.
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