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Will cable providers stop offering TV?

As hard as it may be to imagine, there may be a day when your current cable provider is no longer bundling television into your cable package. Today, companies like Time Warner (TWC) and Cablevision (CVC) offer customers packages for their internet and pay television, but those days could be numbered.

While I do not think we are going to see Time Warner and Cablevision cease offering television in the near future, I do believe it will eventually happen. It is going to be years down the road, but the future appears pretty clear to me, and it is cable providers only being in the internet business. I have felt this for a long time, but now that opinion is being backed up by Cablevision CEO, James Dolan.

The driving factor behind the shift in the cable industry is that more and more people, especially young people, are watching an increasing amount of TV programs online. With so much content available online, it is becoming difficult for cable companies to convince people that they need to pay for television programs.

Companies such as Netflix (NFLX) and Amazon (AMZN) offer monthly packages that are much cheaper than typical cable packages, and services such as Hulu make it very easy to watch your favorite shows at a fraction of what Cablevision wants to charge you.

In a recent interview, Mr. Dolan admitted that he could see a future where Cablevision would no longer be offering TV programming, focusing solely on internet packages.

Not only are cable providers finding it tough to hang on to subscribers, the costs associated with programming are rising. Things are starting to come to head, as evident in the current spat between Time Warner and CBS (CBS), which led to CBS being blacked out in some of Time Warner's biggest markets, including New York and Los Angeles. Over this past weekend, Time Warner blacked out CBS and Showtime in these areas, and subscribers were unable to watch popular shows such as “Dexter” and “Big Brother”. If the black out continues tonight, the summer hit “Under the Dome” will also be unavailable.

CBS has responded by blocking out full episodes on its website to Time Warner subscribers in the affected markets. Heated debates between cable companies and programmers are nothing new, but the current debate shows just how tense the current situation has become.

Not only does Mr. Dolan see a future where Cablevision is no longer offering TV, he is actually taking steps to make his company ready for the shift, if and when it happens. He is putting a lot of money into beefing up his company's connectivity, and is streamlining operations to make the company more efficient. He wants to make sure that he could easily transition into purely offering internet and be constrained by running the company with the massive infrastructure it currently has.

He went on to compare the current state of the cable industry to that of the music industry a decade ago when free music started showing up online. The music industry was slow to adapt, and it led to the downfall of companies that required people to pay for music. He says he learned the lesson that you either “ride the wave”, or “get eaten by the wave”.

Analysts have long proclaimed that the internet was going to kill pay television, and with at least one major cable company CEO backing up that view, it seems like the analysts have been right all along.

Don't expect to get a call from Cablevision any time soon saying that you will have to look elsewhere for your TV programs, but one day that call will come, and in my opinion there is not much cable companies can do to avoid it.

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.