How Will Cord Cutters Impact Home Entertainment?

I chatted recently with a tech-savvy friend about his sizeable and seemingly eternally-growing cable bill (Hello, Comcast.) My friend mused that he might just drop his cable and rely on Google TV, Hulu and various free sites on-line. His rationale was simple: He never watched live TV anymore, choosing instead to depend on several VOD solutions to find and watch his favorite shows and the most recent movies. Additionally, he hadn’t watched a DVD or Blu-ray in months. Subscribers like my friend, “cord cutters” as they’re referred to in the technology journalists, are a real concern to the cable industry and, possibly, the home entertainment divisions of studios and content owners. I think there are few entities in modern life which are more reviled than cable companies. (Well, maybe Congress or HOAs.) The price of cable seems to go up with little or no increase in utility for the consumer. Consumers have been fooled into buying bundles, paying for 500 channels when the average user (focus group of one: me) actually only watches a couple dozen. It’s a classic misdirect — compel consumers to pay for many channels they don’t watch for the privilege of receiving the ones they do. A couple business are addressing this, albeit from different angles and serving different constituencies. Both join an expanding galaxy of VOD solutions which will have significant impact not only on broadcasters, but also physical media distributors. Aereo offers streaming of broadcast TV via the web, allowing consumers to sidestep the cable companies in favor of something more personal…and more economic. In an interview with AdAge, CEO Mr. Kanojia said:

We don’t want to kill TV, we want to expand its access to people. If you look at people who are 25 or 30, they are not signing up for cable subscriptions. Very few of them are. And they are getting their content online. TV needs to come online in a rational way. If you come to market and say, “You have to pay $200 a month to get the four, six or eight channels that you watch,” that’s just irrational. It’s going to die on its own.

On the other end of the entertainment spectrum, Redbox just brought their streaming service out of beta with a focus on viewers interested in a movie experience. CNET’s Roger Cheng got a demo:

CEO Shawn Strickland, a former Verizon executive, wanted to make it clear Redbox Instant would not compete against Netflix. His service would offer up new and some older movies — and only movies. He said he believes there’s a segment of consumers who are hungry for nothing but a film experience.

My friend brings the industry dilemma into focus: Why buy or rent discs or subscribe to cable, all of which are relatively high-margin products/services, when alternatives exist which will deliver the same or better experience? The Los Angeles Times recently reported that Home Video Revenue Stops Falling, so this issue isn’t critical just yet, but it is something…it should be something…which home video executives ponder. Look for upcoming posts discussing why DVD and Blu-ray have a future. Cable? I’m not so sure.