Cable TV Is Doomed
The death of cable television would probably still be inevitable without the Federal Communications Commission's national broadband plan, which aims to expand broadband Internet access to 90% of Americans and dramatically increase access speeds. But the measure, if it passes, will accelerate the demise of cable television as the standard method of consuming television. Now that Google is leading the way in developing Internet TV, the rise of this technology will come even faster.
Cable TV was always a bad model for the consumer because, in a sense, you're paying twice. When you watch The Daily Show, for example, you pay the cable company to bring Comedy Central's programming into your home. But you also contribute to Comedy Central's bottom line by watching its ads. However, the Internet allows you to connect directly to Comedy Central without the cable company go-between. You only pay once -- either with your eyeballs on ComedyCentral.com, or with your wallet on iTunes. (Sure, you have to pay for Internet access, but if you consider it a necessary utility rather than an optional luxury, as the FCC's national broadband plan clearly does, then that cost is incidental. That is, access to streaming TV shows isn't the primary reason you buy Internet access. It's a bonus.)
We're already familiar with two business models for web TV: Hulu's ad-supported programming and iTunes' micro-payment system of about $2 per ad-free show. Both of these are preferable to cable not only because they're more cost-effective but because they allow the viewer a greater degree of control. You only pay for what you watch, whereas with cable you pay primarily for things you'll never watch. Americans watch on average 5 hours of TV a day, so a cable subscriber with 100 channels is only consuming 0.2% of the programming he or she is charged for. With the average cable bill swelling to $64 a month in 2009 from $47.50 a month in 2004, ditching cable for web-based TV is an increasingly attractive option.* High-end consumer electronics companies like Sonos and Sony already sell products to link your TV wirelessly to your computer or directly to the Internet.
The two greatest obstacles for web TV are video quality, which lags online, and certain programming. While more TV shows are available online all the time, news and sports remain the big holdouts. The problem is that these shows are best viewed in real time, but live streaming technology still produces jumpy and relatively low quality video. Foxnews.com just can't sustain a million viewers flooding its web site for four hours every evening. So news shows opt to upload high-quality clips after the broadcast is over and sports events tend to not make it online at all. But broadband speeds have risen for years (excepting a recent stagnation) and the FCC aims to make it many times faster.
Inevitably, broadband capacity will catch up to the monumental demands of live-streaming 60 Minutes and Monday Night Football to millions-strong audiences. The gradual rise in capacity will also close the gap in video quality between web and cable. When YouTube launched in 2005, few users had the bandwidth to watch the videos. Five years later, not only can nearly everyone watch, but YouTube has introduced progressively higher resolutions to take advantage of growing bandwidth. Eventually, the picture quality of web videos could match or even exceed that of high-definition TV. After all, cable video quality is fixed. Ratcheting up the resolution, as with the introduction of digital high-definition TV, requires cable providers to overhaul entire networks of physical infrastructure and requires consumers to buy new hardware. Cable can't keep that up.
It's not hard to foresee a day when Americans come home and, using an Internet TV system that would probably look a lot like your DVR menu, queue up the latest situation comedy or key in to a live news broadcast. Maybe shows will have traditional ads, maybe they'll be ad free but cost a dollar each, or maybe viewers will get to choose. But payment model would be just the beginning of the changes. Networks, no longer forced to fill exactly 24 hours of daily programming, would act more like movie studios, releasing as many or as few titles as they wished. High-quality shows would prosper as networks dropped the unneeded filler. The market would open up to anyone with a camera and a server host, inviting a flood of independent TV shows produced on a shoestring by directors with broad creative license. Ironically, the much-troubled print journalism business could find its way into broadcast. Outlets like the New York Times and the Atlantic already put out video. One day, Atlantic TV could compete with Nightline and Meet The Press. We're no Katie Couric, but it's better than paying a cable bill.
_______________
*Of course, I know that cable is cheaper because it bundles. Five hours of TV a day multiplied by $2 per hour-long show would means $300 a month on cable. That's too much. So what's more likely is that iTunes or Hulu begins experimenting with different pay models. One can imagine, say, $10 a month for infinite access to Hulu, or a Sam's Club-style program where paying a low monthly subscription rate gives viewers a cheaper micropayment rate on each iTunes-sold show. The specific strategies don't particularly matter now. The point is that there's no cable-bill middle-man, and that cuts significant fees on manpower and infrastructure upkeep.
Cable TV was always a bad model for the consumer because, in a sense, you're paying twice. When you watch The Daily Show, for example, you pay the cable company to bring Comedy Central's programming into your home. But you also contribute to Comedy Central's bottom line by watching its ads. However, the Internet allows you to connect directly to Comedy Central without the cable company go-between. You only pay once -- either with your eyeballs on ComedyCentral.com, or with your wallet on iTunes. (Sure, you have to pay for Internet access, but if you consider it a necessary utility rather than an optional luxury, as the FCC's national broadband plan clearly does, then that cost is incidental. That is, access to streaming TV shows isn't the primary reason you buy Internet access. It's a bonus.)
We're already familiar with two business models for web TV: Hulu's ad-supported programming and iTunes' micro-payment system of about $2 per ad-free show. Both of these are preferable to cable not only because they're more cost-effective but because they allow the viewer a greater degree of control. You only pay for what you watch, whereas with cable you pay primarily for things you'll never watch. Americans watch on average 5 hours of TV a day, so a cable subscriber with 100 channels is only consuming 0.2% of the programming he or she is charged for. With the average cable bill swelling to $64 a month in 2009 from $47.50 a month in 2004, ditching cable for web-based TV is an increasingly attractive option.* High-end consumer electronics companies like Sonos and Sony already sell products to link your TV wirelessly to your computer or directly to the Internet.
The two greatest obstacles for web TV are video quality, which lags online, and certain programming. While more TV shows are available online all the time, news and sports remain the big holdouts. The problem is that these shows are best viewed in real time, but live streaming technology still produces jumpy and relatively low quality video. Foxnews.com just can't sustain a million viewers flooding its web site for four hours every evening. So news shows opt to upload high-quality clips after the broadcast is over and sports events tend to not make it online at all. But broadband speeds have risen for years (excepting a recent stagnation) and the FCC aims to make it many times faster.
Inevitably, broadband capacity will catch up to the monumental demands of live-streaming 60 Minutes and Monday Night Football to millions-strong audiences. The gradual rise in capacity will also close the gap in video quality between web and cable. When YouTube launched in 2005, few users had the bandwidth to watch the videos. Five years later, not only can nearly everyone watch, but YouTube has introduced progressively higher resolutions to take advantage of growing bandwidth. Eventually, the picture quality of web videos could match or even exceed that of high-definition TV. After all, cable video quality is fixed. Ratcheting up the resolution, as with the introduction of digital high-definition TV, requires cable providers to overhaul entire networks of physical infrastructure and requires consumers to buy new hardware. Cable can't keep that up.
It's not hard to foresee a day when Americans come home and, using an Internet TV system that would probably look a lot like your DVR menu, queue up the latest situation comedy or key in to a live news broadcast. Maybe shows will have traditional ads, maybe they'll be ad free but cost a dollar each, or maybe viewers will get to choose. But payment model would be just the beginning of the changes. Networks, no longer forced to fill exactly 24 hours of daily programming, would act more like movie studios, releasing as many or as few titles as they wished. High-quality shows would prosper as networks dropped the unneeded filler. The market would open up to anyone with a camera and a server host, inviting a flood of independent TV shows produced on a shoestring by directors with broad creative license. Ironically, the much-troubled print journalism business could find its way into broadcast. Outlets like the New York Times and the Atlantic already put out video. One day, Atlantic TV could compete with Nightline and Meet The Press. We're no Katie Couric, but it's better than paying a cable bill.
_______________
*Of course, I know that cable is cheaper because it bundles. Five hours of TV a day multiplied by $2 per hour-long show would means $300 a month on cable. That's too much. So what's more likely is that iTunes or Hulu begins experimenting with different pay models. One can imagine, say, $10 a month for infinite access to Hulu, or a Sam's Club-style program where paying a low monthly subscription rate gives viewers a cheaper micropayment rate on each iTunes-sold show. The specific strategies don't particularly matter now. The point is that there's no cable-bill middle-man, and that cuts significant fees on manpower and infrastructure upkeep.
