WHEN CHARLIE BROOKER, the creator of “Black Mirror”, a television series about the social impact of new technology, goes away for the weekend with his family, his young son occasionally encounters something perhaps too barbaric even for his father’s dystopian show: an old-fashioned TV set with channels and a fixed schedule of programmes. Instead of being able to watch whatever he wants at any time, he has to wait until a certain hour on a certain day on a certain channel. “It just strikes him as terrifyingly antiquated,” says Mr Brooker.

That kind of television will eventually be consigned to oblivion. People will be able to pick any show at any time from just a few favourite platforms, like Netflix (where “Black Mirror” resides) or Amazon, as well as Facebook and Snapchat for videos shared by friends and celebrities. Everything from Fox, say, will be on one channel instead of many. And Mr Brooker junior will easily be able to search an army of brands: a Lego channel, a Harry Potter channel, a “Star Wars” channel.

That moment may be drawing nearer, but there are still plenty of obstacles in the way. The internet has already changed what viewers watch, what kind of video programming is produced for them and how they watch it, and it is beginning to disrupt the television schedules of hundreds of channels, too. But all this is happening in slow motion, because over the past few decades television has developed one of the most lucrative business models in entertainment history, and both distributors and networks have a deeply vested interest in retaining it.

Existential threats

Pay and broadcast television, still the foundation of video entertainment at home in much of the world, is being eroded from two sides. At one end, people are watching videos free on large social platforms like Facebook, Instagram (which is owned by Facebook), YouTube and Snapchat. Each of these platforms now claims billions of views a day. Free videos are supported by advertising, which will begin to eat into the TV advertising market, currently worth $185bn. Many of these videos may be disposable (literally so in the case of Snapchat, where stories usually disappear after 24 hours), but social platforms like Facebook have excellent information on who is watching and for how long, enabling them to sell highly targeted advertising. Facebook, YouTube and Snapchat also have the scale needed to keep users on their platforms for long periods at a time. On average, Facebook users spend nearly an hour a day using Facebook itself, Instagram and Messenger, in addition to the time they spend on WhatsApp.

At the other end, people are consuming premium-quality video on subscription services such as Netflix, Amazon and Hulu in America and on many other streaming services around the world. Netflix’s 94m subscribers watch the service for nearly two hours a day, and rising. Netflix and Amazon are amassing big user bases by charging a low subscription—$8 to $12 a month—and investing heavily in ad-free content. That spending spree is driving up the cost of producing quality television for everyone else. Thus internet economics is gradually strangling a well-established business model: cable TV.

The shift from broadcast to cable television in the late 20th century was something of a long-tail event. Media companies delivered a large package of channels that contained something for everyone, initially at a reasonable price. The total audience for television kept growing as customers were offered more channels to choose from, and the distributors and makers of video content reaped rewards from subscriptions and advertising. The number of channels proliferated as media companies discovered that serving niche audiences could generate big revenues: Fox News, created in 1996, contributes more profit than any other asset in Rupert Murdoch’s empire, much as ESPN, an all-sports network, remains the most lucrative part of Disney (and the most profitable channel of them all).

Yet as media companies kept adding channels, pay TV stopped being a good deal for viewers. Back in 1995 Americans had an average of only 41 channels to choose from, and watched ten of them a week. By 2008 cable subscribers had an average of 129 channels to choose from and watched 17.3 of them a week, according to Nielsen, a market-research company. Five years later they had access to 189 channels but were still watching only 17.5 of them each week, almost the same as before. There is a limit to how much of the tail consumers can eat.

At the same time they are paying much more for having so many options, and schedules are inflexible. In America the typical pay-TV bill has nearly doubled in a decade, to more than $100 a month, according to Leichtman Research Group, whereas disposable incomes have mostly remained flat. That created an opportunity for internet video providers. Netflix could give viewers a lot of programmes in one place, to watch whenever they wanted, for less than $10 a month. And social networks were offering video on demand free.

So regular TV watching is in decline. In America, the most developed market, viewing of broadcast and cable TV by all age groups fell by 11% in the six years to the autumn of 2016, to slightly more than four hours per day, according to Nielsen data compiled by Redef, a media newsletter. Over the same period viewing by those aged 12-24 dropped by a staggering 40%. Market penetration of pay TV in America has slipped from nearly 90% in 2010 to just over 80% as people abandon cable altogether (cord-cutters), switch to less expensive packages (cord-shavers) or never sign up for pay-TV bundles in the first place (cord-nevers).

Cord-cutting is only beginning in America, and as yet plays no part in less developed markets, where both penetration and prices are much lower. But if it goes on, it will be devastating to the content companies, which have been enjoying gross profit margins on cable of 30-60%.

Somewhat ironically, these trends help explain why TV is now the best it has ever been. In the new age of premium television, networks and streaming services are competing for subscribers. Television used to rely on broad formulaic programming in its quest for advertising dollars, but that began to change in the 1990s when HBO, a premium cable channel without advertising, began offering high-quality programmes in order to win subscribers. Cable channels like FX (owned by Fox) followed, building passionate fan bases for great shows to justify higher cable fees and to keep subscribers on board.

You’ve never had it so good

Streaming services have now sharpened the competition for viewers’ attention. Netflix, Amazon and Hulu between them will spend well over $10bn on television content this year. HBO has responded by raising its budget to over $2bn a year. This contest has given viewers “Game of Thrones” and “Westworld” on HBO and “The Crown” on Netflix—shows that cost $10m or more an episode to make, three or four times as much as the television dramas of old. It has also caused Netflix to pay tens of millions of dollars for a third season of Mr Brooker’s show, “Black Mirror”, prising it away from Britain’s Channel 4.

Not everyone will be a winner. Last year more than 450 scripted original shows were available on American television, more than twice as many as six years earlier. This year there may be 500, signalling the approach of what John Landgraf of FX calls “Peak TV”, the point at which there is more television than the media economy can sustain. In its study of the future of video, Redef noted that programming executives are cancelling far more scripted shows than they used to.

Traditional media companies are trying to defend the pay-TV system that made them rich. Hulu—co-owned by Disney, Fox, Comcast and Time Warner—and AT&T, a pay-TV and telecommunications giant, are among those offering a cheaper version of pay-TV—a “skinny bundle”—streamed over the internet. AT&T made an even bolder, if riskier, move last autumn by bidding for Time Warner. If approved by regulators, the $109bn acquisition would give AT&T vertical integration to protect it if and when the current pay-TV system crumbles.

But that day of reckoning is still some way off. The last remaining stronghold of the pay-TV oligopoly is live programming, especially sports, which traditional networks do very well. Sports events are among the few remaining true “mass” experiences; the entire audience watches the same thing at the same time, which big advertisers find irresistible. At a “sports summit” in December hosted by MoffettNathanson, a research firm, Nielsen produced a chart showing just how much sport has come to dominate traditional TV. Sports programmes accounted for 93 of the 100 most viewed broadcasts in 2015, compared with only 14 ten years earlier.

Advertising rates in general have been flat or declining in most of the industry, but spending on ads for sports has risen rapidly, by 50% in the decade to 2015, according to Nielsen and MoffettNathanson. This remains true even as the number of viewers has begun to decline because programmes that can attract large audiences are so scarce. Live sports are also an important selling point for pay-TV customers, allowing sports channels to charge cable and satellite distributors more for carrying their networks. ESPN, owned by Disney, has about 90m subscribers and enjoys fee revenues of nearly $8bn a year, making it by far the highest-grossing cable channel anywhere.

The cost of sports rights too has been rising dramatically around the world as sports leagues exploit the traditional TV system’s desperate need for them. In America the annual fees that ESPN and three of the four big broadcast networks are paying for the rights to broadcast the National Football League to early next decade have nearly doubled in ten years, to an average of about $5.5bn a year. ESPN and TNT, owned by Time Warner, are paying a combined $24bn for the rights to broadcast National Basketball Association (NBA) games over nine years, almost three times as much as they were paying under their previous deal.

Investors are asking how long this can go on. ESPN has lost millions of subscribers in recent years, but says that the network’s value will continue to grow (Disney does not report ESPN’s profits separately). The escalating fees charged for sports channels will put more pay-TV customers off.

Viewers will also turn to other options, especially on mobile phones and tablets, for which the streaming rights are sold separately. Telecommunications companies around the world are likely to offer increasingly large fees to stream sports over their data networks. Streaming of live sports will become more common, though initially on a limited scale; the technology for concurrent streaming of a big sporting event to tens of millions of fans is still some way off.

More importantly, the existing business model remains too lucrative to abandon so soon. But eventually fans may find themselves watching sports on screens in a completely different way: in alternative realities.