Monday, November 3, 2008

Is the Internet Killing Cable TV?

Programmers have been enjoying a duel revenue stream for quite a while; payment per cable customer and advertising revenue. Programmers then introduced VOD and viewers began enjoying video content with limited, if any, commercials to interrupt the flow of the show. And now, pressured to provide content on demand regardless of the device, added their shows on the web with Hulu, Joost,, and many, many other platforms to stream and enjoy your favorite TV shows and movies. So why pay for cable when all this content is accessible elsewhere.

For some, continual price hikes from their cable operator has accelerated this desire to disconnect the cable box. The article calls these folks "cable-cutters". TV manufacturers, like Sony, are building TV sets that directly access the web. And don't forget Apple TV either. Tivo has partnered with numerous content providers to bring on demand through the web easily to the TV set. And when broadcasters go digital, video quality over the air will be as good as cable. Consumers are pushing back. "Thousands of hours of TV shows and movies are available for free on the Internet, or via paid download and rental sites — services made possible now that broadband service from cable and telephone companies is widely available. Local stations preparing for the digital-TV transition next year are already broadcasting free high-definition TV, sometimes at a higher level of signal quality than a cable system delivers."

A bad economy certainly does not help this trend. Cable operators have already taken notice. Those that disconnect from taking multiple products from their provider will see their discounts expire and their rates soar for an internet connection. Some will start putting a streaming meter on internet usage. Telcos are providing an alternative to cable in the streaming space. It may spell new opportunities for other wireless distributors to enter the market.

Today, the number of "cable-cutters" may be negligible; still, it is a slippery slope that cable operators should be aware of. First comes dropping premium channels, than dropping to basic service only. Price your service too high and watch the customers leave for greener pastures.