Fragmented audiences taking toll on cable networks

USA Network, the nation's most-watched cable network, lost about a million prime-time viewers over the last six years as part of a broad decline in audience at popular cable channels.

TNT, Fox News, MTV, and other cable networks also posted audience losses, according to Nielsen data, with streaming video companies siphoning off viewers and millennials migrating away from cable, experts say.

"Within the past year, cable's share of the total viewing pie has started to shrink," Jon Swallen, chief research officer at New York's Kantar Media, said last week. "I can't put a figure on it. But it is widely understood by media buyers and advertisers."

"The total amount of time being spent watching television remains steady or is slightly increasing," Swallen said. "But the viewership also is fragmenting."

There are two prevailing causes:

Hundreds of millions of digitally connected tablets, smartphones, game consoles, laptops, and other electronic devices in U.S. homes stealing viewership from TV.

The surging influence of Netflix.

More than 30 million people subscribe to Netflix, the on-demand streaming service of TV reruns and original programs that was so small in 2008 and 2009 it didn't even publicly report its streaming subscriber base.

So far, the migration from cable networks has taken place at a "manageable rate that people can adapt to," Swallen said. But he added, "The next five to 10 years will be transitional and kind of ugly."

Cable-industry officials warn that viewership and ratings will be harder to attain in coming years and are talking about reinvigorating cable networks with more original programming and sports. They also caution that the Nielsen data seem to overstate audience declines by failing to capture TV watchers who access shows and movies through video on demand, iTunes, apps, and other streaming services.

But it's an accepted fact that TV watchers are changing their behavior and the audience patterns at cable networks seem to be repeating the earlier pattern shifts at broadcast TV networks.

The biggest of the cable networks, experts say, face the biggest threats.

Comcast Corp. acquired the perennially most-watched USA when it bought NBCUniversal in 2011. In the years leading up to the acquisition, USA had unbound success - and growing viewership - with reruns of the hit shows House and NCIS inflating its audience. As the popularity of those shows wore off in the years since Comcast took over, the audience fell off, too.

USA also deliberately targeted a younger and wealthier TV audience in fall 2013 when it began televising Modern Family reruns - a corporate decision to make the network attractive to advertisers.

Modern Family alienated some of USA's traditional viewers, but the series did what it was supposed to, lowering the average age of USA's audience by five to seven years to a demographic advertisers covet, network officials say.

Nielsen data show that USA's prime-time audience fell to about 2 million viewers in 2013-14 from 3.1 million in 2008-09. The Nielsen data captured average same-day live viewing and next-day DVR viewing over those years.

USA officials say the cable network improved its profitability over the six years of audience declines and is expected to generate more than $1 billion in profit this year, making it a huge contributor to NBCUniversal and Comcast's bottom line.

USA spokeswoman Hilary Smith said the higher profitability resulted from better advertising rates, higher affiliate fees paid by pay-TV distributors to carry USA, and syndication revenue. USA sells TV shows to streaming companies.

NBCUniversal's other cable channels include Syfy, Bravo, NBC Sports Network, and CNBC. Bravo - and a handful of other big cable networks owned by other entertainment companies - actually gained viewers over the last six years, according to Nielsen.

"I think the fact of the matter is that the next five to 10 years in basic entertainment cable, as it relates to ratings, are going to be much more difficult than the last five to 10 years," Steve Burke, head of NBCUniversal, said in a recent Comcast earnings call. "I just think it's unreasonable to assume that the ratings for those businesses are going to grow if you look over a five-year or 10-year period."

Brian Roberts, Comcast chief executive officer and chairman, voiced similar sentiments in the same call. "With our cable networks," he said, "ratings have been under pressure industry-wide as the market continues to be very competitive with more original programming and time-shifted viewing than ever before."

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