Bad Economy is Great for Netflix, Bad for Cable.

When I want to see the official trailer of the next Hollywood flick, I often resort to online video streaming services: what I’m looking for is on YouTube in most instances.  And online video services are becoming more appealing beyond the occasional YouTube search. The rather expensive cost of cable TV subscriptions is driving people to seek alternatives, like internet TV.  With the new era approaching and people becoming more frugal as a result of declining economy, are we on the verge of bidding farewell to the pay TV industry? Here are some points to ponder.

Economic meltdown urges people to be prudent

The significant decrease in the number of new cable subscriptions and sudden proliferation of cancellation existing accounts may be attributed to people focusing more on their basic needs and cutting down on luxury services.  This leaves the companies within the pay TV circle greatly affected, and not in a good way.

A parallel scenario affects the housing market, where property values are also declining, and home foreclosures are on the rise. Pay TV highly depends on a per-home subscription, and this has a negative affect on cable offerings as well.

Late last year, Time Warner cable sought respite from poor economic performance. In general, cable TV decline is primarily a consequence of cord cutting, which is really happening, folks.

Web TV options

As mentioned, when the going gets tough, cheaper and practical alternatives save the day. In the case of fairly costly amounts spent on cable TV, monthly subscription fees are forcing consumers to choose among web TV and internet video streaming services that include Hulu, NetFlix and Amazon. Some companies are already seeing the opportunity within the market while economy is still in this slump. Walmart recently released VUDU for iPad via a mobile web browser—a subscription-free and movie-on-demand service.

In an article read in the Associated Press, Sanford Bernstein analyst Craig Moffett estimated that there were nearly 400,000 lost subscribers from the previous quarter alone. He said that “rising prices for pay TV, coupled with growing availability of lower cost alternatives, add to a toxic mix at a time when disposable income isn’t growing.”

With the regional economic state lying on an unstable platform, people tend to limit spending on things outside the basic needs.  While everyone is still uncertain if what we’re experiencing right now is worse than in 2008, even a few dollars doled out for cable subscription could be a casualty of frugality borne out of a number of weak economic upshots including unemployment and stock plunge.

As web technology introduces costlier means of data distribution, and companies begin to orient themselves around the emerging delivery options that broadband and mobile provide, the cord-cutting for cable companies will be a very real circumstance of the economy.  Just as enterprises turned to the cloud for cost savings in running applications, so too will consumers find reprieve from costly cable through cloud-based program delivery, which has several features that cable can’t offer.  In the end, these cable companies are likely to commoditize web-based services, but until then there’s certainly a consumer-driven change that will shift the tide in media.