Is It Time for You to Drop Cable TV?

Sept. 13, 2010— -- Competition is heating up in living rooms across the country.

Cable television, which has long dominated expanded TV services, is facing more rivals than ever before.

Not only are satellite companies ready to siphon off customers unwilling to pay for $100-a-month television, but Internet companies too are increasingly offering services not meant for your computer, but for your TV.

Apple unveiled a newly designed device earlier this month meant to stream Internet programming to a home television. The updated $99 Apple TV lets users rent movies on demand for prices starting at $2.99 and television shows for 99 cents.

Google says it will release later this fall its own device for the family television. The price is unknown, but the company has said Google TV will be an Android-based, set-top box manufactured by Logitech and designed to ease the process of searching for and watching Web-based programming on the TV set.

And they're just the most recent additions to the crew of cable alternatives.

Netflix, Roku, Boxee Bring Web Programming to the TV

For $8.99 (and up) a month, Netflix subscribers can already stream programs through a variety of gaming consoles, such as Nintendo's Wii and the Xbox 360. And the Roku player, a tiny set-top box that costs about $60, also lets users stream movies and TV shows from Netflix and Amazon Video on Demand.

Boxee even gives consumers a free option. After downloading the software to their computers and connecting the computer to a TV, users can watch movies, TV shows and clips from anywhere on the web and share their programs with friends.

The company also plans to release the Boxee Box, a set-top box that eliminates the need for a computer, "as soon as possible."

Janko Roettgers, co-editor of the new media and online video blog NewTeeVee, said industry watchers have long debated the cable cord-cutting phenomenon. But in the second quarter of 2010, pay-TV subscriptions in the United States actually declined for the first time, he said.

Cable companies lost 711,000 subscribers, which was their biggest quarterly loss in cable TV's history, according to media research firm SNL Kagan.

New Devices Could Accelerate Cord-Cutting

Roettger said some of the subscribers moved to satellite services and others signed up for pay TV during the digital television transition and decided to cut loose when the introductory rates went up.

The research firm expects the industry to recover in the third and fourth quarters and cautions not to read too much into the data, but the new web-to-TV services could continue the trend, Roettger said

"I think this might be the first quarter where we really see this trend have the impact of cord-cutting," he said. "And I think it's going to continue because of these [new devices]. … They're just going to accelerate this because they make it much easier than before."

Until now, he said, the technically minded were really the ones prepared to trade in cable TV for the web-only experience. But the new devices from Google, Apple, Boxee and others make it more accessible to everyone else.

Survey: One in Eight Could Cut, Reduce Pay TV in Next Year

According to an August survey from the New York Times and CBS News, 88 percent of respondents paid for traditional TV service. Only 15 percent of those subscribers considered replacing cable with Internet services such as YouTube and Hulu.

But in April, media firm Yankee Group found, cable's domination of the expanded TV market might be weakening. One in eight consumers would cut or reduce their pay TV service in the next 12 months, it found.

Cable television packages offer customers so-called "linear" programming: viewers sit in front of the tube and feed on whatever is available at that time. But Benoit Felten, an analyst with Yankee Group, said that model could be going out of style.

"We're starting to see customers who actually realize they don't want linear TV any more," he said. "They come home and they want to watch something specific. They don't want to watch just whatever is on TV."

New products could in particular threaten telephone and cable companies, Felten said, because if people are already in the mood to cherry-pick programming, services such as Apple TV make the process extra easy.

Web Services Let User Cherry-Pick Programming

"To me, the main difference with Apple is we know the ergonomy is going to be absolutely to anyone who wants to use it," he said.

Most of the on-demand programs provided by cable companies are accessed through clunky remotes and require scrolling through more than a dozen pages to find the movie or TV show you want to watch, he said.

"All of that are hindrances to purchase. If there's one thing we know for sure, Apple won't go wrong there," he said.

People who tend to watch mostly TV series or movies might find a better, cheaper alternative in services such as Apple TV than traditional pay TV, he said.

The upsides are that you get to watch whatever you want, whenever you want to watch it. But a key downside is that you have to wait for recent programming and will miss out on live events.

Lack of Live Sports, Limited Content Could Slow Growth

For sports fans in particular, that could be a major problem.

"People who are sensitive to that -- people who are very excited about sports events and want to experience them live -- they won't disconnect from premium TV," he said.

Another limitation, at least for Apple TV, is that consumers can only watch programs from those networks with whom Apple partners.

In announcing the new Apple TV, CEO Steve Jobs said that although only ABC and Fox agreed to rent programs through the service, others would likely join later.

But Felten said it's not a foregone conclusion that others will follow. "TV content owners might think we put a finger into that cog we might get sucked up whole and we'll lose our bargaining power," he said.

Unless Apple TV is an overwhelming success and networks can't afford to not distribute there, they might hold off, which would slow the growth of available content on those platforms.

Still, given the amount you can save (after paying for initial set-up costs), if you know you can get the sports you want to watch online and are open to exploring new territory, going cable-free could be the right choice for you.

"If you're a little adventurous and open to finding these new avenues of programming," NewTeeVee's Roettgers said, "then I think that's a good way to go for you."