Most major network TV shows and many of the most popular cable network shows are now available online. Nielsen Online estimates that during last June Hulu.com had 3.2 million Internet users watching more than 106 million videos streams of complete TV shows, segments of shows and behind the scene clips and that ABC.com delivered 27 million streams to 2.9 million viewers, according to the Wall Street Journal on October 3, 2008. Some estimate that only 1% of the total television audience watch TV programs online. However, 83% of respondents to a survey of NBC.com users said that they watched a show on the network’s Web site. A recent study by Integrated Media Measurement showed that more than 20% of viewers from their research panel watched some network programs online, up roughly 6% during this past fall. “What this study is showing is that the long-vaunted convergence of the TV and the computer is happening faster than anybody thought it was happening,” noted Tom Zito, Integrated Media’s CEO, to the WSJ.
The TV networks and other content providers are trying to stay ahead of consumer behavior and are fueling the growth of online TV distribution, which could threaten the economic model that TV is based on, per the WSJ. Craig Moffet, a cable-industry analyst, feels that TV and cable companies are recklessly pursuing web viewers without considering the long-term consequences if too many customers pull the plug on their service in favor of free Web video. Moffet notes to the WSJ that a typical half-hour TV show contains eight minutes of advertising, but online shows only contain about two minutes.
More than 80% of U.S. TV households pay an average of $70 a month to receive TV programming through cable, satellite or telephone companies and the cost has increased 79% since 1995, almost double the level of inflation, per the WSJ. Cable is in a particularly risky position if more people start viewing TV shows online, since half of their revenue comes from the $53 billion in subscriber fees generated in 2007, according to Bernstein Research. While cable operators say they provide more value by offering hundreds of channels of programming to viewers, consumers only tuned into about 16, according to Nielsen, so they obviously don’t need the 119 channels the average home receives.
I predict that more technology savvy consumers, looking to save money during the recession, will start dropping their cable and satellite TV subscriptions and start watching their favorite TV shows online. The trend will start with younger viewers and then work its way up to older viewers over time. Jeff Pulver, the founder of Vonage and PrimetimeRewind.tv, sums it up best when he told the WSJ that “he believes the Facebook and Google generation won’t look askance at getting television shows from the Internet,” adding that “some people will [continue] to subscribe to cable, the way their grandparents did.”
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