Pay-TV companies and online video giant Netflix enjoy an uneasy alliance. People love both instantly accessible 100-plus channels and watching entire seasons of their favorite shows in marathon sessions. But as Internet streaming increasingly eats into bandwidth, customers could see the strained coexistence lead to bigger bills.
Sanford C. Bernstein & Co. analyst Craig Moffett told Bloomberg on Wednesday that cable providers will eventually get on-board with a new payment model that doesn't leave them footing the bill for millions of avid Netflix users sucking up bandwidth. Usage caps and home data plans could become the norm.
"As more video shifts to the Web, the cable operators will inevitably align their pricing models," said Moffett. "With the right usage-based pricing plan, they can embrace the transition instead of resisting it."
Though Moffett didn't cite Netflix topping the North American Internet traffic usage list earlier this year as a motivator for potential Big Cable price realignments, it's likely a frequently referenced bullet-point during Big Cable board meetings. According to the report, Netflix accounted for 30 percent of NA Internet traffic during its daily peak time and over 22 percent of Internet traffic in general.
Another concern is cord-cutting, which some believe has less to do with online video supplanting cable TV and more with cash-strapped consumers saving during rough economic times.
Regardless of how many pay-TV customers have actually axed cable lines due to a satisfactory Netflix subscription, the possibility still haunts cable companies. Market research company The NPD Group named cord-throttling - spending more and more time on alternative video downloading without necessarily tossing cable bills in the trash can - a potentially bigger problem for cable TV companies.
Time Warner CEO Jeff Bewkes had a change of heart this month about Netflix. Considering it may pave the way for pricey new plans, that's not too shocking. Moffett agreed: "In the end, [online video] will be the best thing that ever happened to the cable industry." (via Bloomberg)
