Published April 09, 2011
The tablet computer may have found its killer app: television.
The question is: What’s it going to kill?
Cable companies and TV networks have watched ratings decline and endured a barrage of stories about "cutting the cord"--subscribers dropping cable TV service in favor of Internet video. Most of that has been hype, but cable companies are worried about the future.
"It's not really happening yet," said Collin Dixon, a senior partner at research firm The Diffusion Group. But there has been weakness in the cable market, he said. Pay TV gained just 0.2 percent last year, according to SNL Kagan, mostly in satellite TV and services like Verizon Fios -- not cable.
Meanwhile, sales of Apple's iPad tablet continue to skyrocket. According to some analysts, Apple has sold 30 million iPads. And other tablet entrants, from Samsung, Motorola, HP and RIM, hope to ride those coattails.
What are those millions of tablet owners doing? Increasingly, they're watching video.
They're enjoying "Weeds" on Netflix and downloading movies like "The Tourist." And some of them may be wondering why they need cable TV service at all.
In the grand scheme of moving pictures, cutting the cord isn't a practical option -- yet. Trying to find something to watch online (other than Netflix's streaming service) is like hunting for a good read at the dentist's office. But broadcasters and cable companies are sweating about the future. Viewers increasingly want video wherever and whenever, according to Dixon -- meaning away from the TV set in the living room.
So Cablevision, Time Warner and Comcast have jumped on the magic tablet ride, producing apps to deliver their programming, control their DVRs and conduct sundry other tasks. The apps are all free -- the catch is that viewers still have to pay a traditional cable TV subscription to gain access to the wireless streaming feeds.
Why are cable companies doing this? By accommodating a second screen, they hope to stay relevant -- and retain their customers.
"This is a defensive position," explained Dixon. "There's no question consumers want access."
It's ironic, actually: Apple failed to get traction out of its Apple TV box, but the iPad has found a way in the back door, although not via Apple's iTunes store. Rather, competing services like Netflix have opened the door, and now by offering free tablet apps the cable companies may be inadvertently propping it wide open. Seeing the options available on tablet computers could open many eyes to the possibility of cutting the cord.
The cable firms hope it has exactly the opposite effect, of course.
Granted, few people are comfortable (yet) with the idea of abandoning a cable package in favor of, say, buying a separate Web subscription to HBO. But producers and network executives are struggling to figure out the future anyway, and want to reserve the right to distribute their programs online. For this reason, BET, MTV, Nickelodeon and others, including some Fox programming, told Time Warner to pull their programming off its app.
"The scary thing about video is that everyone watches a lot of it and they tend to watch it at the same time," said Dixon. Put little Cindy-Lou in the living room watching iCarly, Dad watching baseball in the basement, and Mom following cable news in the kitchen, and that could overwhelm a cable Internet connection. "It's not a problem today, but it could be a problem tomorrow," said Dixon.
So to keep online video use down to a dull roar -- and keep people watching traditional cable TV stations -- some cable companies restrict how much consumers can download or stream over the Web.
Download caps are already in place at Comcast and Charter, and AT&T is planning to introduce one in May. The limits are usually set at 150 to 250 GB a month. It means you can only watch so many hours of Internet video before you'll be hit with another bill.
Here's how it works:150 GB is roughly 150 hours of TV a month. According to Nielsen, the average American watches more than 143 hours of TV a month. So if everyone at home keeps watching different programs, a typical TV family would quickly exceed that monthly allotment.
Cable companies argue that this won't effect today's TV and Internet viewers. Most of us aren't going to run into extra charges. But as the iPad apps presage, it isn't about today -- it's about tomorrow.