In the beginning, television programming was free for anybody with a television set and an antenna. Unfortunately, there weren’t very many channels to choose from and they were all loaded with ads. Later, cable companies found success for themselves by charging consumers to pipe an ever increasing number of channels into their homes. But it still seemed like there was never anything good, and it was all still loaded with ads. Now advanced telecommunications technology enables consumers to access television and video content on demand via the internet, provided they have a broadband, or high speed, connection. The increasing market penetration of broadband internet service may be leading consumers to abandon traditional television in favor of internet based on-demand video distribution, and forcing traditional television content producers to find new ways to maintain profits in the wake of this change.
Watching high quality video content on a television screen via the internet has become easy for the average consumer. Streaming video players, which connect televisions to the internet and allow someone to easily navigate the vast sea of internet video content, are readily available for purchase in electronics stores. One such product, the Roku 2 HD, retails for about $60 and allows access to hundreds of online video channels without subscription fees over a broadband internet connection (“Choose your Roku”, 2011; “Roku channel store”, 2011). Meanwhile, Cox Communications charges about $20 per month for a very basic programming package consisting of 23 channels (“Cox Communications”, 2011). Since the Roku only costs the equivalent of three months worth of the most basic cable television service and does not require a subscription to anything, it is a much more affordable option. Ten years ago the requirement of a broadband internet connection would have been a problem, but now high speed access has become commonplace. According to a report published by the Pew Internet & American Life Project, only 3% of adults in the United States had access to a broadband internet connection in June 2000, but by May 2010 that number shot up to 66% (Smith, 2010). Figure 1 shows this rise in broadband access, and how it has largely displaced the slower, dial-up type connections. While overall internet access rose significantly during this period, the chart clearly shows broadband internet access dominated the market during this decade. Since the technology to enable internet video steaming is available and affordable, inevitably more and more consumers will realize this and begin to embrace this emerging trend.
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Figure 1. Percentage of adults in the United States with access to the internet from June 2000 to May 2010. (Smith, 2010)
Cable companies certainly recognize the emerging trend because they see their revenues declining, but they largely see the internet as a threat rather than as an inevitable future. According to a recent...