The radical transformation of TV is just getting started

There have never been more ways to watch TV without actually paying a cable or satellite company for a huge bundle of channels. And it's getting increasingly difficult for traditional TV to compete with services that allow you to watch nearly anything ever made with the tap of a finger.

Live TV is "falling in importance every day," Rich Greenfield, a media analyst at BTIG Research, recently told Tech Insider. "The vast, vast majority of the content created every single day doesn't need to be watched live."

An increasing number of people, frustrated with growing cable bills and poor customer service, and enticed by the ever-improving alternatives, are choosing to "cut the cord," or ditch their TV subscriptions or never even sign up for one when they move out on their own. Instead, they're opting to stream video online from services like Netflix, Hulu, HBO Now, Showtime, and Amazon. It seems as though a new streaming service comes out every few weeks.

Despite the recent deluge of these services, around 100 million US households still shell out a hefty sum of money each month for a big bundle of channels. That doesn't mean the shift isn't happening - it means we're just getting started.

Peter Kramer/NBC

NBC's "America's Got Talent' is one of the most popular shows on TV.

??Why traditional TV is still hanging on

One reason people still pay for traditional cable is that we're creatures of habit, and this is how we've watched TV for years.

But another is that streaming services are not yet, at least for most people, a replacement for a TV subscription.

"Streaming TV is like television in 1951," Phillip Swann, the president of the TV news site TVpredictions.com, told Tech Insider. "It's exciting. It's eye opening. It makes you wonder what's next. But it's also very frustrating."

Live online streaming services are just not as reliable as cable or satellite. Customers of Sling TV, a new live TV streaming service from the satellite company Dish, were outraged when the service went out during the Duke-Michigan State NCAA basketball semifinal game in April.

Sling also lacks some of the basic functions TV subscribers have become accustomed to: It doesn't have a DVR, only some of the channels on the service allow you to stop, pause, and rewind, and the on-demand programming is limited.

Sony's PlayStation Vue, which is the closest streaming service to a TV replacement, has a virtual DVR, but it's missing some very important channels like ESPN. You also need a PlayStation 3 or PlayStation 4 and to live in one of the five cities where it's offered to subscribe.

But above all, streaming services can't compete when it comes to live sports.

Some sports leagues offer streaming packages - MLB.TV is the most successful and well-known service - but in-market games are blacked out, meaning subscribers can't watch local teams play home games as well as some games that are nationally broadcast. The NBA also announced last week that people will be able to stream out-of-market games for $6.99 per game but only those that aren't already being broadcast nationally. And for most people, there's no option to stream live games from the NFL, the most popular sport in the US, without paying for TV.

"Sports is one of the biggest things that we know that keeps people paying for cable," Dan Rayburn, an analyst at Frost & Sullivan, and the executive vice president of the industry site StreamingMedia.com, told Tech Insider.

And it's likely to stay that way for a while.

Long-term contracts between leagues and TV networks, some spanning a decade and providing leagues like the NBA and NFL more than $1 billion per year in revenue, keep sports on traditional TV.

At this point, and even a few years from now, it won't be possible for the leagues to make up the huge sums they get from TV networks by launching online streaming services directly to consumers, Rayburn said.

"The economics just don't make sense," Rayburn said.

A standalone streaming version of ESPN, though, could come sooner than one from any of the big sports leagues.

Bob Iger, the CEO of Disney, which owns ESPN, one of the top-rated cable networks, said on Monday that the company will eventually launch a streaming service directly to consumers, though it won't happen in the next five years. One of the reasons this is attractive, apart from reaching (and getting revenue from) people who no longer pay for traditional TV, is because such a service would allow the network to personalize the programming based on who's watching.

"ESPN will know who their consumers are," Iger said on CNBC. "We'll use that information to customize their product, enable personalization - to essentially engage in a much more effective way."

Why everything is about to change

As more networks start to stream their programming directly to consumers, and more tech companies get into the industry, streaming will become even more mainstream. Reliability will improve, and more features, like DVR, will become more widely available.

Apple, which has a track record of upending established industries and creating products that give customers great user experiences, could be the company that blows up TV as we know it.

Apple is reportedly working on an internet TV service that could launch as early as this fall. The service will include a package of about two-dozen channels and some of the major broadcast networks, like ABC, Fox, and CBS, according to The Wall Street Journal. The New York Times reports that it could as little as $25 per month.

Even cable companies, worried about cord cutting, have started to offer more flexible and less expensive packages.

Earlier this month, Comcast, the largest cable company in the country, announced Stream, a $15-per month streaming service. It comes with the big networks like ABC, NBC, and CBS, as well as HBO, and has a virtual DVR, but for now it only works on PCs and on mobile devices like smartphones and tablets.

Even though it's a gateway to a more expensive Comcast subscription, it's a significant departure for Comcast, as it doesn't require a cable box, installation, a contract, and you can quit at anytime.

The future is bright

An entire generation has grown up with Netflix and YouTube, and millions are accustomed to being able to watch music videos, cat videos, and clips from their favorite movies anywhere and anytime.

Networks and cable companies have to adapt, or they'll be left holding your cable box.

"Ultimately, what we'll move to is a world where you can buy more flexible sets of channels [and watch] on whichever device you want to, whether it's your television through a set top box, whether it's your tablet, whether it's your smartphone, [or] whatever other displays we might have in our lives at that point," Jan Dawson, the chief analyst at Jackdaw Research, a Utah-based technology research firm, told Tech Insider.

Dawson said that along with cable and satellite companies offering TV, wireless providers and tech companies like Amazon, Apple, Google, and even Microsoft, could be selling TV.

These streaming services will make it so TV will no longer be limited by geographical boundaries. Right now, you may be stuck with one choice for cable, and depending on where you live, you may not even be able to subscribe to the satellite companies DirecTV or Dish.

But as soon as Apple, or any other company, for that matter, launches a new, nationwide online TV service, everyone with a broadband internet connection will have one more choice of who to pay for TV.

These competitive pressures will force traditional pay TV companies not only to get more creative with their own offerings, but also to improve their customer service, technology, and, hopefully, prices. Because if they don't, people will get their TV elsewhere.

The so-called "bundle" of channels, once tightly bound, is also starting to come apart. People watch on average only 17 channels, according to Nielsen, even though they get hundreds.

So the bundle of the future may be a collection of apps rather than channels, BTIG's Greenfield said.

"Maybe those bundles will include Netflix, HBO Now, and Spotify," Greenfield said. "We still may be subscribing to bundles. Those bundles may just look very different than the linear channel bundles that we're used to."

Hulu is already offering a new type of bundle that gives a discount on Showtime's new service if people buy it through Hulu rather than on their own.

And it's not just the subscriptions that will get better - the TV-watching experience itself will also improve.

Imagine a TV that knows exactly what you want to watch, and exactly when you want to watch it.

"When you walk into your home, your phone, which is the device that will be with everyone, will be recognized by your TV, and it can turn your TV on and know that it's me and not my wife and have my suggested programs ready for me to choose," Roger Lynch, the CEO of Sling TV, told Tech Insider.

Netflix, the largest subscription streaming service in the world, is very personalized - what you see when you login to your account is different from what other people see. The company is pretty good at getting to know you and giving you what it thinks you want to watch, thanks to analyzing nearly everything you do on Netflix, and classifying its programming into tens of thousands of different micro-genres. Expect not only Netflix to get better at suggesting what you want to watch, but the other online streaming services, too.

Programming will also continue to get better.

We're in the midst of what critics have labeled "a new golden age" of TV, and one of the reasons is because are more outlets than ever for creators to go with their work. They are no longer limited by a handful of TV networks to distribute their content - Amazon, Netflix, and Yahoo! joined the traditional cable and broadcast networks in being nominated for Emmy Awards earlier this month.

Perhaps in the next few years we'll see names even more tech companies among the nominations.

For years, consumers haven't had much of a choice about who they pay to get their TV. But thanks to the internet, we're on the verge of a radical shift that will give us exactly that.