“Hashtag” may have just been crowned 2012’s word of the year, but it seems 2013 could be the year of “cord cutting.”
Cord cutting is a growing trend threatening the cable industry’s standard bundle package sales, as many are now opting for wireless broadcasting services such as Netflix, Apple TV, and Hulu.
According to a survey conducted by Convergence Consulting Group, “2.65 million people have forgone their cable subscriptions for alternative methods between the years of 2008 and 2011” to opt for low-cost Internet video streaming subscription services or other free video platforms.
Nielsen reports a similar figure, finding that the number of households paying a multichannel provider last year declined by 1.5 million. In fact, Nielsen noted a 22.8 per cent increase in cord-cutters over the past year.
As of 2012, the cable industry is also seeing a reduction in subscriptions.
One new product that threatens the cable industry more than ever before is Intel’s new Internet Protocol television (IPTV) service.
“For the past year or so, Intel has also quietly been working on a top-secret set-top box that could not only be better than what Apple, Google, and even Microsoft offer today, but also kill the cable industry as we know it,” claims Forbes.
What’s different about Intel’s new platform is that consumers, for the first time, will be able to subscribe solely to individual channels or even TV shows—instead of having to buy bundled cable services with hundreds of channels from providers such as Time Warner.
Intel’s new TV product allows viewers to pick and choose any channel they want a la carte and only pay for those channels.
And it seems Hollywood is on board, as Intel has negotiated licensing agreements with Tinseltown allowing customers to subscribe per-channel as well as have the ability to use “Cloud DVR” features.
According to Forbes:
As Intel has approached Hollywood with much more dedication (and dollars), this is likely the single reason that Intel, more than any company before it, has the potential to really bring to consumers the things we have never seen in online content before, such as live sports, release schedules that match broadcast, and first episode through current libraries for video on demand … Intel has made it clear to Hollywood they are serious about this product and dedicated to its longevity. Intel is also prepared to invest heavily in making it a success.
While Silicon Valley measures investments in tens of millions, Hollywood often drops more than $100 million into a single movie. Intel came to the table knowing this, and so was able to negotiate the licensing agreements with Hollywood that other tech giants have never been able to.
Intel also has the technology to create a product unlike its competitors, as the company has been providing chips for set-top boxes since 2005.
But some, like Business Insider’s own Henry Blodget, aren’t sold just yet.
In his March article, “Intel’s Plan To Become A Cable Company Is One Of The Dumbest Ideas Ever,” Blodget writes: “Nothing Intel knows how to do helps it in any way in going into this business. No one Intel knows helps it in any way in going into this business … Mark our words: Intel’s cable business will be dead on arrival.”
(Intel was scheduled to hold a press event at CES last week but the company has since said they will not be announcing anything related to the product or holding any public demos.)
And Blodget’s not alone.
One TV executive expressed to The Wall Street Journal that despite their dollars, no one wants to be the first to negotiate a deal with Intel, fearing disrupting relationships with cable and satellite operators.
But the competition for cord-free eyeballs is fierce.
Netflix is increasingly looking to create its own content and is even developing new seasons of “Arrested Development,” for example.
Amazon also recently announced it is developing its own TV shows, and YouTube is betting $100 million per year on original content.
But in the TV industry, $100 million is a small sum compared to the $5 billion Jeff Bewkes says Time Warner spends on content in a single year.
And Time Warner is still holding tight to one of its entities: HBO.
The cable giant’s subscribers can watch HBO programming via HBO Go, but they still have to subscribe to HBO through a cable provider.
Because HBO is owned by Time Warner, they will never allow a pure HBO Go option since HBO is the reason many people still subscribe to a broader bundled cable package.
Many cord cutters were up in arms because they want HBO content and are willing to pay, say, $10-20 for HBO Go without a cable package, but have no option to do so.
163,673 people even signed a Twitter petition saying they would pay for HBO Go as a separate entity, but the network known for their quality original programming refuses to change anything “for now.”
Despite some cable giants still holding strong to the current cable model, it seems their grasp on the cable cord will only last “for now.”
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