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The stage is set for a showdown between television networks and cable/satellite TV services, thanks to the internet. It wont happen overnight, but your monthly cable or satellite bill could eventually be replaced by a monthly bill from Hulu, an online service that streams TV shows on demand.
For $10 a month, viewers will reportedly have access to a wider selection of shows than the free, ad-supported version Hulu currently offers. The service would work on PCs and specialized devices such as the iPad, videogame consoles and set-top boxes. The company plans to test a version of this Hulu Plus subscription, an expected development, with select users as early as this month to find out whether theyll will bite, according to sources cited by the Wall Street Journal and All Things Digital.
In order for consumers to pay for a video service like that, it will need to be reasonably comprehensive. So its no accident that the same week Hulus subscription plans came to light, a Bloomberg report surfaced that the company is talking with CBS, Viacom and Time Warners television studio divisions to add their shows. That would be on top of a line-up that already includes Fox, NBC Universal, ABC, ABC Family, Biography, Lionsgate, Endemol, MGM, MTV Networks, National Geographic, Digital Rights Group, Paramount, PBS, Sony Pictures Television, Warner Bros. and more, including Wired.com.
For ten bucks, one wouldnt expect the level of programming cable and satellite offer for larger monthly bills. But if paid Hulu works, the networks will have proof that the internet can circumvent cable and satellite companies and they could easily add more expensive content tiers down the road.
If the networks prove they can charge consumers directly, and consumers are happy to supply their own cable boxes in the form of game consoles, television-connected computers, set-top boxes, tablets and so on, its difficult to see why networks would tolerate cable and satellite providers grabbing a slice of profits, just for sending the shows through one pipe rather than the other.
Cable and satellite are classic middlemen. When the internet meets the middleman, the middleman tends to disappear or at least be replaced by a thinner middleman. Weve seen it with record stores, classified ad-dependent newspapers, video-rental stores, bookstores and any other business that delivers something that the internet can deliver more efficiently.
The thinner middleman as far as IPTV is concerned could be ISPs, which already charge more for faster data plans capable of delivering better-looking video. But as multipurpose providers, theyll never command as large a slice of the pie as cable/satellite companies did with their television-only pipes.
Television networks hold the trump cards, because they own the content that will be distributed however the market decides to distribute it. Still, cable providers reportedly hope to replace themselves, in a sense, by providing competing services for delivering television over the net. After all, most of them also provide ISP services, and dont want to lose a source of revenue.
But that ship may have sailed. The networks (with Providence Equity Partners) already own the Hulu internet distribution system, which is accessible from any ISP, and expect it to earn $200 million this year even before the subscription has launched.
Now that the networks are set to start charging for a more comprehensive version of Hulu, cable and satellite companies should be even more nervous about how television shows will be delivered in the coming years than they were already.
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