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Cable companies’ new strategy: Embrace cord cutting?

December 12th, 2013 at 11:30 PM
Cable Industry Cord Cutting

While cord cutting isn’t yet a threat to cable companies’ profits, many in the industry can see where the market is headed and seem to understand that consumers aren’t as willing to pay for expensive bundles when they have cheaper alternatives in the form of Netflix and Hulu. According to Forbes‘ Dorothy Pomerantz, cable and telecom companies are considering adapting to this new world of online television by doing what had previously been unthinkable: Embracing cord cutting.

Essentially, Pomerantz has found that many incumbent cable companies are mulling becoming multi-channel video programming distributors (MVPDs), which is basically a fancy term for pay TV companies that deliver video services over IP instead of over traditional cable. Or put another way, TV stations for MVPDs are just another application that gets delivered over the web.

There are plusses and minuses to this from cable companies’ perspectives. On the plus side, it would let pay TV companies get in on some of the cash that cord-cutters are sending to Netflix and Hulu every month. On the downside, going to IP-based pay TV wouldn’t be as profitable for cable companies and might even result in more of them having to compete with one another for consumers’ services.

BTIG Research analyst Richard Greenfield tells Forbes that moving to an MVPD-style model “risks launching a ‘race to the bottom’ for cable companies in terms of pricing.” While this may sound bad to cable industry executives, most consumers probably like the idea of seeing providers race to see which one can offer them the cheapest service.

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