Cable television

Why Internet Video Threatens Cable TV


The force of habit is a powerful thing. How else can I explain why I’m spending $ 200 a month on an Internet, TV, and Phone plan, most of which I don’t really need? My wife and I make most of the calls on our cell phones; about the only people who call our landline are telemarketers. An even bigger waste of money is television, which accounts for $ 125 of the $ 200 package. We don’t watch a lot and almost anything we want can be uploaded. So why not just pay for the internet and forget about the rest?

My answers are totally lame: I am 49 years old; that’s how I’ve always done things; change is difficult. Plus, I still find it easier to watch certain things on TV, like news and sports. I’m not a big sports junkie, but I will watch a football game occasionally, and this winter we will be following the Vancouver Olympics, because I love ski racing and my wife loves figure skating. . But are these events worth the $ 1,500 we’ll spend on television this year? Certainly not. And yet we procrastinate, hang around and keep paying.

This is true for most people. Nielsen recently reported that although online video viewing has increased by 35% in the past year, 99% of TV viewing is still done on a traditional TV. But this is not the case for the younger ones, like my mate Dan Frommer. He is 27 and works as a copywriter for a tech website. Frommer unplugged cable TV in May 2008 and instead gets broadcasts from the Internet through a Macintosh computer connected to his LCD TV. He can’t get everything he would like to see, but he saved $ 1,500 on cable TV charges. “I’m not going to get ripped off for a pile of garbage that I don’t look at anyway,” he says. Many of her friends in their twenties have also unplugged. The next generation, today’s teens, will probably never get cable TV.

This is terrible news for cable companies. For decades, they’ve had a glorious business model, handling the toll that stood between you and the shows. Today, the internet offers a way around that toll, and cable companies are faced with a dilemma: are they embracing the internet and trying to make money online, or are they fighting the internet and trying to prevent destruction? The answer is to do both: weather the rising tide with one hand while searching for viable internet business models with the other.

This is the context of the recent $ 15 billion deal between Comcast and GE, whereby Comcast, America’s largest cable operator, acquired 51% of NBC Universal. There are plenty of reasons why Comcast made the deal, but one is to prepare for a world where people stop paying for cable TV and instead have everything on the Internet. This is the same reason why phone companies like Verizon and AT&T have entered the mobile phone business.

Until recently, it was easy for Comcast to hang on to cable TV subscribers because watching Internet TV was quite painful. But that changes, quickly. The best example is Hulu, an ad-supported website whose owners include NBC, ABC, and Fox. Hulu is television like television should be. There is good content: The Office, 30 Rock, The Daily Show, Saturday Night Live. You watch what you want, when you want. You can watch highlight clips. You can search archives. You can even connect your computer to a big screen TV. Launched two years ago, Hulu now streams nearly a billion video streams each month.

Supposedly, Hulu is only meant to supplement regular television, not to replace it. It’s still a threat. Now, by owning part of NBC, Comcast will exercise some control over the site. It remains to be seen whether Comcast will hinder or ruin Hulu, accidentally or on purpose. (The company says it has no plans to change it.) Comcast operates an ad-supported site called Fancast which is similar to Hulu, and soon it will be launching a site that people who subscribe to. premium channels like HBO will be able to watch these channels online. “Online video is our friend, not our enemy,” Brian Roberts, CEO of Comcast, likes to say.

Cynically translated, I think that means Comcast doesn’t care which route the video takes, as long as Comcast can handle the toll. Owning a large content company gives Comcast some leverage in this struggle. The problem is, even if the toll gate remains open, it probably won’t make as much money as it used to be. The rule is that when the internet hits an industry, where you used to make money, you are now making pennies. Or pennies. So for cable companies, the good old days may soon be over. For the rest of us, however, they may be right around the corner.