Financial Times 11/8/11
Americans average five hours of TV viewing per day. If time is to be left for work and sleep, old ways of watching must decline as new ones arise. Heavy investment in internet video by Amazon, Google and Netflix surely spooks executives at pay TV companies. Their nightmare scenario: the internet does to pay TV what wireless phones did to landlines.
Third-quarter results from the largest TV distributors should ease fears about mass cable-cutting. The big cable companies – Time Warner Cable, Cablevision, Comcast, and Charter – all lost video subscribers, but the declines were lower than in the year-ago period. Telecoms companies AT&T and Verizon added TV customers, and the satellite company DirectTV had a bumper quarter for subs, driven by American football, more than offsetting nasty losses at rival Dish. Nor does competition from the internet seem to be causing price pressure: revenue per user was up across the industry.
Still, total 2011 sub growth for cable companies is likely to be less than 1 per cent. Perhaps the internet is stealing marginal subscribers. In any case, the game has hardly begun. There are still fewer viewing options on the internet – pay TV has a virtual lock on sport, for example. And content producers will work to ensure that cable and satellite distributors keep getting the best stuff first, because that is where the money is, for now. They see the internet primarily as a new way to earn revenue from back catalogues.
What will happen if, as the options available on the internet increase, viewers leave pay TV in greater numbers? One likely outcome is that broadband access (also sold by the cable and telecoms companies) will get pricier. Video already consumes more than half of internet bandwidth; as that grows, someone will have to pay for it. Cord-cutters save money, but cannot expect something for nothing.
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