Monday, January 18, 2010

Leaving the Mailstream (Follow-up)

The previous post, Leaving the Mailstream One Customer at a Time, discussed Netflix's plan to switch from a DVD distribution company to a content streaming company.   Advertising Age just published an article describing the wider implications of streaming media for legacy broadcast, cable, and satellite modes for distributing video content.

While the readers of this blog may ask, why should I care if people get their videos over the Internet rather than through a cable box?   The answer is, every customer that switches from cable or satellite to the web reduces the number of customers that receive cable or satellite bills, the number of bills paid by mail, and mail advertising from cable and satellite companies as the return on advertising diminishes.  The switch may force cable, satellite and fiber optic telecommunication services to shift to an opt in mailed bills from the opt-out standard today.

The previous post noted another of factors that will determine how fast the switch to streaming video occurs.  It is clear from the article, that content providers expect the switch to come, they just have not figured out yet how they can make money from providing content and still pay the salaries now paid to those producing video content.

What I found most striking in the article is both how fast the number of households with Internet connectivity to the home entertainment center has grown.  The numbers suggest that this phenomenom has grown beyond early adoptors and is very close to becoming mainstream.  The following table is published in the Advertising Age article and illustrates where we are now.  For more information about this phenomenon, Advertising Age is promoting a new white paper, The Economics of Online Video, that may be worth reading for those whose business will be affected by the transition from legacy cable broadcast, cable, and satellite to online video distribution.

By the numbers
Number of Xbox consoles connected to the web:
20 million (Microsoft)

Peak number of Xbox users simultaneously online:
2.2 million (Microsoft)

Percentage of U.S. households with gaming console that can stream movies:
39% (InStat)

Average price consumers paid for digital cable Q3 2008:
$79 a month (Centris)

Average price Q3 2009:
$70 a month (Centris)

Number of Boxee users:
850,000 (Boxee)

U.S. digital-cable subscribers:
42.1 million (NCTA)

U.S. basic-cable subscribers:
62.6 million (NCTA)

Number of Netflix subscribers:
approximately 10 million (Netflix)

Number of web-connected TVs sold by 2013:
80 million (Park Associates)

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