Two fascinating articles on the future of TV here, particularly with the rising costs of cable coupled with the economy the way it is.

But pay-television is now under threat, especially in America (see article). Prices have been driven so high at a time of economic malaise that many people simply cannot afford it. Disruptive, deep-pocketed firms like Amazon and Netflix lurk, whispering promises of internet-delivered films and television shows for little or no money. Whether the lure of such alternatives or poverty is what is causing people to cancel their subscriptions is not clear. But the proportion of Americans who pay for TV is falling. Other countries may follow.

Pay-TV executives argue that people will always find ways of paying for their wares, perhaps by cutting back on cinema tickets or bottled water. That notion seems increasingly hopeful. Every month it appears more likely that the pay-TV system will break down. The era of ever-growing channel choice is coming to an end; cable and satellite distributors will begin to prune the least popular ones. They may push “best of basic” packages, offering the most desirable channels—and perhaps leaving out sport. In the most disruptive scenario, no longer unimaginable, pay-TV would become a free-for-all, with channels hawking themselves directly to consumers, perhaps sending their content over the internet. How can media firms survive in such a world?

http://www.economist.com/node/21526367

AND

In America HBO is a premium network, meaning people must pay an additional $15 a month or so to subscribe to it on top of whatever they pay for a hundred-odd “basic” cable channels. That means it need carry no advertising, and can instead carry levels of sex, violence and bad language at which advertisers would blanch. No advertising also means the company focuses on pleasing subscribers rather than amassing huge audiences. “If you’re not paying for television, you’re not the customer,” says Jeff Bewkes, head of Time Warner. “You’re the product.”

Other companies are also exploiting the creative freedom that begins when the ad breaks end. Showtime, a premium network owned by CBS, has put on original shows like “Dexter”, “Nurse Jackie” and “Weeds” that have scooped up plenty of plaudits. Starz, which is run by Chris Albrecht, HBO’s former boss, is trying to pull off the same trick. On August 8th it announced a broad agreement to co-produce shows with BBC Worldwide, the British broadcaster’s commercial arm, which is moving into producing shows for American television.

Since 2000 Showtime and Starz have each added about 6.7m subscribers in America, more than twice as many as HBO (they have between 18m and 20m subscribers each, compared with HBO’s 28m). Showtime and Starz often cost less, and can be more attractive to distributors. When HBO adds a subscriber, it tends to split the new revenue about 50-50 with the cable or satellite broadcaster. The other premium networks are more likely to do flat-rate deals in which the distributors keep all the money from new subscriptions after paying a single licence fee. When choosing which channels to get behind with marketing, the cable companies act accordingly. HBO lost 680,000 subscribers between 2009 and 2010, although its revenues went up, which suggests that many of the viewers who disappeared had not been paying much.
http://www.economist.com/node/21526314