• VidCon vs. Pay-TV: A Modern Tale of Two Cities

    "It was the best of times, it was the worst of times…"

    If you’re looking for a stark illustration of the diverging fortunes of the online video and pay-TV industries - as well as the generational attention/passion gap between the two - then comparing the buzz out of last week’s 6th annual VidCon with the poor early Q2 video subscriber numbers from big pay-TV operators is about as good as it gets.

    For those not familiar with VidCon, it’s the annual convention of YouTube creators, fans and increasingly advertisers that want to weave themselves into this community. This year VidCon drew somewhere between 20K-30K attendees (up from 1,200 just 5 years ago) to the Anaheim Convention Center, with the vast majority being teenagers seeking to get up close to their favorite YouTube celebrities for a coveted selfie.

    I wasn’t able to attend VidCon, but I closely followed the news and coverage, and wasn’t surprised at all to read about the frenzied mobs surrounding YouTube’s biggest stars (I got a taste of the scene when I attended YouTube’s Brandcast in NYC last April, where a line several hundred people long stretched for selfies with Tyler Oakley).

    VidCon is a physical environment that makes highly tangible the eye-popping viewership and subscriber counts the top YouTubers now enjoy. That popularity translates into influence as Variety found in its second annual survey of celebrity influence among U.S. teenagers which found that 8 of the top 10 slots are now held by YouTubers, with Taylor Swift and Bruno Mars being the only mainstream stars to crack the top 10.

    YouTubers appeal to teens because they’re authentic, unguarded, accessible and in many cases, quite talented. They inspire kids with an empowering “I’m a real person who did all of this, and you could too” message that embodies the democratization of entertainment we’re witnessing.

    Which brings us to the woes of the pay-TV industry, and in particular the anemic early Q2 video subscriber numbers which are likely a precursor of the worst quarter ever for the industry. Last week Verizon reported gaining just 26K video subscribers in Q2 ’15 (vs. 100K a year earlier) while AT&T reported losing 22K video subscribers in Q2 ’15 (vs. a gain of 190K a year earlier). The only bright spot (relatively speaking) was that Comcast lost just 69K subscribers in Q2 ’15, its best second quarter result in 9 years.  

    Of course, the problems aren’t just on the pay-TV operator side, but also on the TV network side as well. Last week, prominent Bernstein industry analyst Todd Juenger released a report, “Is Viacom the Next Eastman Kodak,” in which he forecast the eventual demise of the owner of the once taste-setting networks MTV, Nickelodeon and others. Even cable super-power ESPN isn’t immune, lately cutting costs by dropping big-name talent, with Disney CEO Bob Iger now publicly acknowledging that ESPN’s bountiful days in the increasingly expensive multichannel bundle are numbered.

    Meanwhile, not a week passes these days without another new research report being released that points to the shifting consumption preferences from linear TV to on-demand, online sources such as YouTube. The most eye-opening of these just came from SmithGeiger, which found just 18% of 18-34 year-olds’ viewing time is now spent with traditional broadcast and cable TV.

    And so it goes, a modern tale of two cities, the best of times and the worst of times. Online video, epitomized by YouTube, Netflix and others, is booming. Traditional pay-TV, still with tons of top-quality programming, but hobbled by high prices, unwieldy bundles and poor customer experiences, is receding in relevance, especially for younger audiences. It’s hard to see how either of these trends changes any time soon.