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Cable and Satellite Companies, Beware of These Alternatives

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Given the number of other options that are out there now or coming soon, the cable and satellite television services are going to have to work harder for their money.

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Here's definitive proof that everything old is new again: The television antenna is back. It doesn't look precisely like the old rabbit ears that our parents tweaked to get better reception of The Ed Sullivan Show, but the principle is the same.

Some people will do anything to get out from under those monthly pay-tv bills, especially people who get much of their entertainment from Internet-based services and use cable only to fill in the gaps - mostly sports and local broadcast stations. And given the number of alternatives that are out there now or coming soon, the cable and satellite television services are going to have to work harder for their money.

Some of the latest alternatives that are in the works:
  • Intel (INTC) is reported by the Wall Street Journal to be developing a "virtual cable operator," an Internet-based subscription television service. The chip maker is pitching media companies on the service, which would operate with a set-top box it is developing.
  • Aereo, a startup from Barry Diller's IAC/Interactive Corp. (IACI), has launched a $12-a-month service for live or recorded television from the broadcast networks. Subscribers will use Aereo.com to launch the programming. The service, which rolls out in the New York area this week, feeds off a farm of tiny antennas located somewhere in Brooklyn. The networks have already filed for an injunction, alleging copyright infringement. To which Diller basically responds: "What - rabbit ears are illegal now?"
  • A different approach is being taken by Carlos Slim Helú, also known as "the richest man in the world." His company, América Móvil (AMX), just launched Internet-based Ora.tv, which will compete against broadcast television with a slate of original programming, starting with a talk show hosted by CNN veteran Larry King.
  • And then there's the "go retro" approach, which might be a recession story. An updated HDTV-read version of the old "rabbit ears" antenna is still available, and a company called Antennas Direct told the Tampa Bay Tribune that it sold 400,000 of them in 2010, and 600,000 in 2011, to customers who want to bypass their cable company but still augment their Internet viewing with local broadcasts.
And that is what all of the above is about: A recent study by consulting firm Deloitte LLP, called State of the Media Democracy, finds that Americans are consuming more media than ever because of the proliferation of portable devices and the wide range of media available for streaming or downloading.

However, the study finds that 9% of Americans have canceled their cable or satellite subscriptions, and another 11% are considering doing so because almost all of their favorite programming can be found online.

Another survey, by Los Angeles media consulting firm Ideas and Solutions, suggests that 60% of consumers aged 18 to 29 are considering giving up their pay-TV subscriptions.

Thinking about it is one thing. Actually doing it is another. A Nielsen study, released last month, said the number of households wired for cable went down about 2% last year. But most of those quitters switched to satellite or a phone company service, not to exclusively Internet-based entertainment.

Deloitte has one recommendation for the cable companies - get digital video recorders in the hands of their subscribers, so that they have as much flexibility and choice with cable as from other sources of streaming media. About 44% have DVRs now.

Another commonsense move might be to upgrade the outdated remote control device so that users can actually find out what's on their 600-plus channels with the same ease that they search online.

Bruce Upbin, of Forbes, argues that the cable companies must "unbundle" or die. Subscribers pay an average $100 a month, but use a fraction of the gigantic package they are forced to take.

Upbin says his family of four has been "cable-free" since 2008, while continuing to watch all of their favorite programming on demand from sources including Netflix (NFLX), Hulu Plus and Apple's (AAPL) iTunes, combined with free Web programming. The family saved $642 in 2011.

Comcast (CMCSA), the largest US cable company, rocked the pay-TV world - in a good way - last month, when its quarterly results showed that it had stopped its long slow slide in subscriber numbers. After five straight years of losses, totaling 2.2 million customers, it lost only 17,000 paying customers in the last quarter of 2011, a mere blip in its 22.3 million customer total.

Factors in the improvement include a strengthening overall economy, improved customer service, and strong consumer adoption of the company's Xfinity service, which includes a video library and works across mobile devices.

Meanwhile, Time Warner Cable (TWC) lost 129,000 home video customers, ending its latest quarter with 12.1 million subscribers. Cablevision (CVC) lost 14,000 cable TV customers, its smallest drop in four years, ending with 3.3 million subscribers.

Web Watch In Brief:

Where Apple Is In Fifth Place
Apple surpassed Samsung as the world's biggest smartphone vendor in the fourth quarter of 2011, according to Gartner figures. But in China, not so much. According to Bloomberg, Samsung's market share there is three times the size of Apple's and growing. Apple is in fifth place in the Chinese market, mostly because of its limited availability through phone carriers there. China is expected to pass the US as the world's largest smartphone market by the end of this year.

A Google Nexus Tab?
Computer maker ASUS may be preparing to launch an Android tablet branded with the Google (GOOG) name and priced to compete with the Amazon (AMZN) Fire and the Barnes & Noble (BKS) Nook. The site Technorati.com says Google sees a similar need for a low-cost media player for sites including YouTube, Google Play, and Google Books. The 7-inch tablet would be dubbed Google Nexus, like the smartphone line that also uses the Android operating system, and priced somewhere between the Kindle Fire's $199 and the Nook's $250.
No positions in stocks mentioned.
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