|
House -
Maintenance
|
|
Written by Omie Ismail
|
|
Friday, 16 October 2009 12:56 |
|
Page 1 of 3
During the 1980s and 1990s, cable enjoyed explosive growth in the United States. Typically created as a local monopoly, entrepreneurs were able to invest in the required infrastructure and recoup their investment by charging monthly fees for access. Consumers ate it up as the selection of cable channels grew and the relative picture quality was excellent. When the Internet came along in the 90s, cable companies were well positioned to offer access to the web and further leverage their infrastructure. Threats from satellite developed, but cable companies still maintained their dominance...until now.
The very service that they offer, high speed Internet, threatens to undermine their content offerings. Most consumers that have cable watch very few channels. They might have 60 to 150 channels available, but the reality is that many consumers will watch very few of them. As more and more of these programs move online, some consumers will decide that its far cheaper to eliminate their cable and go with an Internet-only plan plus a streaming content service like Netflix or iTunes. Given the huge audiences of both of these services and there increasing libraries of content, its only a matter of time before this shift happens. The economics for the casual TV watcher wanting to cut his or her costs are significant. With Netflix, the marginal cost for streaming an unlimited number of movies or TV shows is nothing. With iTunes, shows and movies cost anywhere from $1.99 to $3.99 each.
Neither of these is a perfect substitute for cable, but they are getting better at what must be an alarming rate for the cable operators. The Internet holds the promise of letting you watch what you want, when you want it; a sort of "a la carte" approach vs. cable's 5 course pre-fixe meal. For content creators like HBO or even individual producers, the Internet may allow them to bypass the cable monopolies and monetize a greater amount of their content directly with the consumer. And as new HDTVs have direct Internet connections, the trend will only accelerate. But the cable operators have a ton of clout right now and HBO derives virtually all of their revenue from them, so cutting the cable operators out will be nearly impossible for HBO and other networks.
|
