Internet Challenging Cable TV

ByABC News
April 13, 2004, 11:08 AM

April 14 -- Cable and satellite TV have cultivated a bitter rivalry for years, and watching Rupert Murdoch and EchoStar chief Charlie Ergen spar is certainly entertaining. But in their zeal to trounce one another, they may be overlooking a more stealthy threat: the Internet.

Consider for a moment the Web's recent encroachment upon television programming.

Time Warner subsidiary AOL recently broadcast basketball's NCAA tournament live to its broadband subscribers gratis. That kind of offer certainly may have prompted an AOL user who is also a DirecTV subscriber to think twice before signing up for the satellite provider's $59 Mega March Madness package.

Meanwhile, Microsoft's Internet service provider MSN has secured the rights to broadcast Major League Baseball to its premium subscribers. For its part, Yahoo! has agreed to broadcast DIC Entertainment cartoons such as Inspector Gadget, Where on Earth is Carmen Sandiego? and Madeline on its Yahooligans TV.

All this should give cable and satellite providers like Comcast and EchoStar something to think about. To be sure, no one will be replacing his or her cable service with EarthLink anytime soon. Web outlets won't release streaming-media viewership numbers, a clear sign they're awfully tiny. But even without much video available, the Internet is already giving television a run for its money. It just so happens that nearly 70 percent of active Internet users log on around 8 P.M. prime time according to Nielsen.

Will Broadband Dominate?

The trend does make us wonder just how long it will be before most folks skip using any kind of pay-TV set-top box altogether and just plug their broadband straight into their shiny new flat-panel TVs. Cable and satellite outfits may generally supply those broadband connections via cable modem or digital subscriber line, but high-speed Internet access is a commodity and will never deliver margins akin to pay TV.