TV is increasingly for old people

Obviously this is a useful mode to have. TV channels about wildlife and history are good examples - you can turn them on even for 10 minutes while you do some chores, for example. But for "stateful" content like sports or TV series this is suboptimal. And that's the bulk of entertainment.

For the former, even among people not paying at all, or not paying for it through the traditional cable company means, big-studio TV content seems more popular than ever (unsurprising since it's higher quality than ever, with still-increasing amounts of money pouring into it). This shift ultimately seems like one that will only hurt the traditional broadcast networks, as well as the cable networks that fill themselves with "passive watching" content versus the stuff that (currently, at least) plays much better in the newer distribution channels. Or maybe stuff like reality will just move online later when that demographic moves online if cable starts to fail. That's probably an area where the "it just works, and it's on, set it and forget" aspect of cable is actually a very large advantage, though. Otherwise, about the only non-large-content-library advantage of cable is that fast forward/rewind on my DVR work way better than on online streaming.

Extreme space and budget restrictions seem to be the only reason to give up the latter. The couch or recliner + TV viewing experience is hard to do without (I did it for a couple of years after moving and being short on space, and then couldn't believe I'd done it for so long after getting a TV again).

Not necessarily. The current generations of "old people" have always had TV; they have always had books, newspapers and magazines; they have always had cassettes for music (vinyl was the reserve of a rich minority and CDs weren't mainstream until the '90s). They have always had cars, trains, electricity, airplanes. They were already 30+ by the time videogames and PCs came about, which is why they left them to their kids. In fact, they saw the digital revolution happening in the workplace and were taken aback, to the point where, 30 years later, they are still not particularly comfortable with it.

The generations that saw real technological revolutions, innovations changing their way of life in radical ways, were the ones that fought the first and second World War. A lot of them didn't have home telephones or electricity while growing up, often even running water was missing; they didn't have cars, trains were expensive, and the thought of flying was just ludicrous. They bought the first radios and TVs and marveled at silent movies. Those generations could recognise change; the current oldies mostly saw marginal improvements, all considered. They spent most of their time actually dealing with social changes, rather than technological; which is why they are responding to the current wave of changes with a barrage of social prescriptions (i.e. silly new laws) -- they can see the social change happening, although they don't really understand the technological underpinnings of it.

Watching shows on the internet is great. The acting talent and quality there has really improved. But, I see this less as taking away from cable, and more as taking away from the box office. Kevin Spacey was doing great movies 10+ years ago, and now he's headlining Netflix's service. Honestly, I think these long running tv shows are a better format for a lot of actors. Breaking Bad just can not be done in a 2-3 hour movie, or in a syndicated format where each episode needs to be treated more or less independently (e.g. Law and Order). However, Netflix didn't really start that trend, cable did.

Also, cable/tv "owns" the coax cable running through the house: the fastest and most reliable way of moving information around the average US home. There's new technologies like Moca that are going to make a lot of things possible that currently are very flakey with current wireless/alt-ethernet solutions.

TV has always been (mostly) about mindless entertainment. I think the shows that are successful outside of a traditional cable package succeed because they were probably inappropriate for the cable programming format anyways. Services like Netflix are filling a new niche, but I don't think they can significantly take away the core value of cable for most people.