Why Cable Providers Could Miss the Transition to Internet TV

I feel for cable companies.  They've been operating for years in monopolistic settings arranged by the Federal government and have taken little time to see that the rise of the internet will clearly cut into their subscriber bases.  Most cable companies have disregarded any mention of users cutting the cable cord, scoffing at the idea that users are as comfortable watching programming on their computer or smart phone as they are on a glossy high-end LED tv.


Screen Size Versus Content Availability
Leveraging Moore's law, the pace at which users are willing to accept a smaller screen size- aka computer- for more video availability is on a dramatic upswing.  Twenty-somethings are accustomed to viewing what they want when they want it and are display agnostic.  Sure, watching a movie on a large HDTV screen is certainly better when you're with a crowd, but if it's one or two of you, does it matter as much?  Not to twenty somethings.  And, this trend, is sure to creep up in age demographics as technology gets faster and wireless rate speeds increase.


The Cost of Programming
Another aspect that cable companies are failing to take notice of is that the price of entry for many InternetTV solutions is far less than the monthly subscription amount to a cable providers television programming.  If users are paying $60-100 just for a certain number of cable channels, how do they feel about paying $20 or $10 or zero per month for ample or nearly limitless content that is available, for the most part, whenever a user wants to watch?  


Comcast is just starting to test different versions of its content programming plus internet channel and web searching features on its own set-top box.  The set top boxes are created by Cisco who has a nifty solution for its cable providers.  Verizon says it sees more subscribers jumping onto their FIOS product, which is traditional cable channels that will allow for more programming watching on other devices as technology rolls out across the country.  DirectTV is using a sling box that gives users the power to watch content from their smart phone to computer and HDTV.   


Marketshare Shrink
Several internet TV devices are already on the market that allow users to completely go around the cable channel provider and instead directly access the internet for content.  Items such as the Roku box, http://amzn.to/glkiqM , which we reviewed in our last post, the Boxee or Apple TV, http://amzn.to/hlNpwS,  give users access to free content channels and nominal subscription channels (Netflix subscribers can view thousands of movies, television and premium channel programming for a low monthly fee of $7.99/month) for the price of two lattes each month and a device price of less than $100.


Cable Operators Chalk It Up to Cost Savings
According to the Wall Street Journal, "the number of US households that subscribe  to cable and other paid TV services fell for the first time since the advent of cable over the past two quarters - by about 335,000 households out of about 100 million, according to data provider SNL Kagan.  
Comcast and othe rcable operators say those declines are predominantly among homes optiong to watch TV over the air rather than online.  Comcast is the largest paid television operator in the US with 22.9 million US video subscribers at the end of the third quarter, 21% more than the second largest US tv-service provider, DirecTV.
Comcast says it lost approximately 275,000 video customers in the third quarter of 2010.  The company expects further declines in video customers for the remainder of the year.
If you want to read more on Comcast's test to add the Web to your TV experience, read here:  http://on.wsj.com/fecaUp

Viewing Habits Are Changing
Where Comcast is likely wrong is in its gathering that users are un-subscribing to cable to go to an antennae and not viewing anything online.  I'm contending that there's more going on here, based upon our own experiment with improving our viewing quality while minimizing or maintaining costs.  Users are already accustomed to viewing things on the internet and it's more likely that users are going to an antennae AND internet viewing options over cable.

Our Experience with InternetTV
So far, we're finding that our user experience is as good or better with our Roku XDS box, http://amzn.to/eFZ4hR, because we avoid commercials.  Saving around $60 per month is also a plus.  Until cable can reduce its monthly pricing to customers, users will continue to seek out less expensive alternatives, which are clearly on the upswing.