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Cable Technology Feature Article

April 09, 2012

Web Streaming Entertainment on the Rise, but Networks Aren't Worried

By Shawn Hebert, TMCnet Contributing Writer

An estimated 2.65 million cable television customers have cut the cord from their provider in the past three years, and relied exclusively on over-the-air and online methods as a means of entertainment.

According to a report published this week by the Convergence (News - Alert) Consulting Group, only 112,000 new cable television subscribers were added in 2011 – down nearly 60 percent from the previous year, which saw 272,000 new subscribers in 2010. By the end of 2012, over 3.5 million will have made the move.

Former customers are flocking to digital streaming services such as Netflix, Hulu (News - Alert) and Amazon. Amazon Prime members get complete access to the company's entire on-demand movie library while Hulu Plus members get the latest television shows virtually commercial free. Netflix, however, is a different story.

Netflix has shifted its focus to their Instant streaming service, which primarily contains older movie and television titles. Streaming rights in 2011 cost the company $3.9 billion, more than triple the $1.1 billion it paid in 2010.

To combat this, Netflix has begun rolling out their own original programming so that it does not have to rely strictly on HBO and other providers for new content. “LilyHammer”, an 8 episode series starring Steven Van Zandt, is the company's foray into TV drama. The show focuses on a former gangster who enters the witness protection program after testifying against a Mafia boss. 

In more alarming news for the television networks, the report states online viewing for television network websites has plateaued. A mere 19 percent of the weekly viewing audience watches one or two episodes on the website of a broadcast or cable network, such as CBS.com or NBC.com

The networks continue to make online full-episode TV “less free” by raising ad minutes and windowing or reducing shows available for free by forcing users to authenticate that they are indeed a paying cable, satellite or telco subscriber. Rather than deal with the hassle, people are simply moving to other sites.

If there is any good news for media conglomerates such as Comcast, Time Warner Cable and Cox (News - Alert) Communications, it's that Brahm Eiley, co-founder of Convergence, projects that the number of people opting out of TV subscription services will slow in the next year.

Once the bleeding has stopped, will networks win back consumers? “The revolution is not coming, at least not for a very long time,” according to Eiley.

Edited by Braden Becker

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