Cable Companies Feel the Heat from Online Services

The Internet continues to change the world. As the increasing amount of information and content available online continues to grow and mature, traditional media and services slowly and eventually vanish. With online entertainment services such as Hulu and Netflix on the rise, and new arrivals such as Google TV and Apple TV on the scene, cable companies are feeling the hurt.

Comparable to a basic retail model, just as online product sales have had a negative impact on brick and mortar storefront sales, so can modern digital offerings. History is once again repeating itself with the latest and modern services.

News over the holiday week stated that a recent report indicated that Americans are increasingly "cutting the cord" on US cable television companies due to taking advantage of cheaper online options. Yahoo! News reports that cable operators lost 741,000 basic video customers in the third quarter of this year alone. It's the largest decline in subscriptions since the research firm SNL Kagan started its tracking of the service in 1980. Adding prior numbers to the mix, reveals a very large recent falloff of customer subscriptions as well, around 100 million. Although it is likely that not every subscriber who has cancelled their cable has moved to an on-line service, industry analysts see signs that many consumers are in fact seeking out the newer offerings.

Jeff Kagan, who is a telecom analyst with a name similar to the mentioned research firm, but with no relation, has said that "the average customer still watches the same 10 to 15 channels," and "Adding more channels and charging more does not make it a better deal... It just makes it more expensive." Kagan also pointed out what many have consumers have complained about for years; bills are high because there really hasn't been much of a choice when it comes to competition with subscription, but "now things are changing."

While increasing costs of traditional pay services and a bad economy can considered for part of the shift, cable companies are for the most part considering some of the newer online services to be more like companion services such as an their own on-line offerings, rather than straight out replacements.

With a new price structure being offered by Netflix, more content being available through Hulu Plus, and the rise of integrated services such as Google TV and Apple TV, it will be interesting to see what cable companies will do next.

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Yahoo! News: US cable TV bleeds subscribers as online grows