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Cable cord-cutting just a snip, but that could be changing

So far, the Internet threat to cable television has been more bark than bite. But that could be changing, some analysts say.

With the economy continuing to weigh on households and better options emerging for Web TV, consumers who have hung on to their monthly cable and satellite television subscriptions may think again.

“Poverty opens the door to substitution at the low end from ‘good enough’ alternatives like Netflix,” said Craig Moffett, a research analyst at Sanford C. Bernstein.

Household incomes shrank for the second year in a row in 2009, as the recession eroded the share of American families earning more than $100,000 and swelled the ranks of people who are poor or just barely making it, according to census statistics released Tuesday.

This follows a remarkable report by SNL Kagan that the number of paid television subscribers (cable, satellite, teleco) dropped by 216,000 in the second quarter – the first decline ever.

Meanwhile, Internet distribution firms such as Netflix , Roku and TiVo have announced new deals with Hollywood studios and major broadcast networks to bring better shows and movies to the Web. With its small supply of first-run shows and movies, Internet television has been lacking. I talked about this and my own experience recently on WAMU’s "Kojo Nnamdi Show" last week.

But that’s changing.

“Modern Family” and “Glee” will be available to Roku and TiVo subscribers with a new business partnership with Hulu.com for first-run streaming videos at $9.99 a month. Currently, if you’re a "Top Chef" fan like me, you have to wait at least one day for the show to re-run on Hulu.com.

Netflix signed a deal with Nu Image/Millennium Films to offer their movies the same day or soon after they premier in movie theaters or on demand with cable services.

“Young people are pretty smart. They're not going to pay for something they don't need to," said Ivan Seidenberg, CEO of Verizon Communications, at a Goldman Sachs investment conference last week.

Cable executives attribute subscription losses to the economy. When people move, they rethink their household budget and may decide not to renew their TV subscription. Cable companies are responding by sweetening their bundled option: For Internet, cable and phone subscribers who stay in their packages, a consumer might be offered faster broadband access at no extra cost, according to the National Cable and Telecommunications Association. Experts say cable companies may also try to charge users for how much data they consume, a practice known as tiered pricing.

Marvin Ammori, a consumer advocate and professor of communications law at the University of Nebraska, said that even though better content options are available today, cable and telecom firms will be loath to make the best content available online for free. Content firms aren't getting as much advertising revenue online as they are through fees and advertising from cable firms.

And, in a paper he wrote about "TV Everywhere," a cable industry strategy to offer content only to broadband and cable subscribers, Ammori said consumers will be reluctant to take up new offerings online.

Rich Greenfield, an analyst with independent research firm BTIG Research, downplays the risk of cable cord-cutting, saying any real threat won’t materialize for three to five years. In an Internet poll, his firm found that 37 percent of paid television subscribers said they would consider dropping service. But when told they may lose live sport events, reality television and favorite shows such as “True Blood,” only eight percent said they would still consider dropping television service.

From a regulatory perspective, Concept Capital analyst Paul Gallant said to watch the Federal Communications Commission for any conditions it may apply to the proposed merger of Comcast and NBC Universal. Lawmakers, such as Sen. Herb Kohl of Wisconsin, have urged the FCC to attach a condition to approval of the merger that would require the merged company to sell programming to Netflix, Apple, Google and other over-the-top television providers.

By Cecilia Kang  | September 28, 2010; 4:22 PM ET
Categories:  AT&T, Apple, Comcast, Consumers, FCC, Media, Net Neutrality, Online Video, Verizon  
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Next: Internet pioneers protest Senate anti-piracy bill

Comments

What a lot of people don't realize is that if you live in a major metro area, you can get your live TV for free using this crazy thing called an "antenna". A far cry from those giant things people used to have on their roofs, antennas these days are small and powerful, and the digital signals they pick up are clear. Cable has a content problem. People may still be hooked on HBO and other movie channels for their popular original series like True Blood, but the vast majority of cable channels and programs are just low-quality syndicated crap and infomercials. When people actually look at the cable shows they really like, they increasingly find that the cost of a cable subscription, plus premium channels, plus a DVR, plus service for multiple TVs, is waaaaay too much for what they get out of it. These people suddenly find they don't mind waiting until the shows are out on DVD or Netflix streaming if they can save hundreds of dollars a month. Some cable originals are available online soon after broadcast, like The Daily Show. So in addition to your internet TV solution, get an antenna for $40 on Amazon. You don't even have to put it on the roof, just throw it in the attic or an upstairs closet. Hook the tuner to your TV, and voila, you can see many of your favorite shows and sporting events live. Plus, when some kind of disaster is happening, you can tune into the local news, which tends to be more relevant to your situation than CNN anyway. If you want to get really fancy, you can record shows by setting up a computer as a DVR. Or you can use another old technology - the VCR!

Posted by: jiji1 | September 29, 2010 11:03 AM | Report abuse

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