Online Killed the Video Star?

In these tough economic times, everyone is looking to cut corners and save a few bucks. No doubt, multicultural audiences who are some of the hardest hit are taking a really close look at every expense. One that seems like a luxury is cable. I pay over $100 a month....for hundreds of channels where ironically I can never find anything worth watching!!

I've mentioned in the past that Hispanics trail the general market in cable penetration - primarily because we live in relatively flat cities like LA and Dallas to name just a couple.

Telemundo shared some data today that said that Hispanics were considering cutting premium channels like HBO and Showtime. But, I started thinking...why end there? With sites like Youtube and Hulu.com (a joint venture between NBC and Fox) attracting millions of video viewers - isn't online video the proverbial TV killer?

Nielsen reported that last year, Americans watched on average 5 hours of TV a day! (I don't have that much time, do you?) Well, apparently the average American does. But, internet users watched 14.3 billion online videos in December 2008, that's up 41% from a year earlier.

With busy schedules because of family and personal commitments and for those of us fortunate to still have jobs - television schedules can be rather rigid. But with online video, you can watch your favorite shows whenever you want - on demand. Yes, I know, DVR is better...does the same thing and you avoid those annoying Hawii Tourism Board ads on Hulu.com, but still. DVR is an added expense...internet video is free. Is it just a matter of time before internet video gives cable a deafening blow?

TV’s Digital Disenfranchisement

Last week, Congress finally approved a motion to postpone the planned TV digital conversion on February 17th. The move was intended to help the 6.5 million households that Nielsen reports to be “totally unready.” While the report indicates that 5.7% of the nation is still unprepared for the switch, those numbers are much higher amongst minorities. Nielsen said 9.9% of African-American households and 9.7% of Hispanic households are totally unready.

Nielsen’s numbers also suggest a number of big markets — among them Los Angeles, Phoenix and Houston — could temporarily lose more than 10% of Hispanic or African-American households with the digital changeover.

Most believe that the lag by both of these demographic groups is driven by the lack of funding for the Commerce Department’s coupon program to subsidize digital TV converter boxes for consumers. There is now a wait list of over 3.2 million for the $40 rebates. Obama’s administration is seeking to include additional funding for this program as part of the economic stimulus package under consideration. The boxes generally cost between $40 and $80 each and can be purchased without a coupon.

I would argue that this is another example of preconceived notions about minorities' income.  African Americans and Latinos over-index in the purchases of home entertainment systems.  Latinos in particular have a high propensity for technology adoption. 

However, one technology that never reached parity with the general market is cable subscription. This is strongly related to the Hispanic population geographic distribution in markets with flatter topography such as Los Angeles, Miami, Houston and Dallas. As such, full-power Spanish-language stations like Univision and Telemundo carry well over-the-air and the lack of Hispanic-targeted cable options have kept cable adoption relatively low.

With minorities lagging behind on this issue, and over 500 stations still planning to move forward with the switch next week, it will be interesting to see how ratings are impacted.  Certainly, a reduction of viewers in these two key demographics will harshly hit the already battered networks.