TV viewers tuning in to shows on Internet
Kenny Johnson recently took a hard look at his finances - and canceled his cable-television subscription.
With a newborn child at home and growing household expenses, Johnson, a senior credit analyst for Fox Home Entertainment in Garden Grove, Calif., says the decision saved him and his wife more than $40 a month - or roughly the increase he is paying at the gas pump every month for his commute to work. The couple held onto their DSL Internet connection, which costs about $38 a month.
Now the Johnsons access most of their television shows online, through Web sites like Hulu.com, in addition to the free broadcasts they pick up over the airwaves. They also bought a set-top box that allows them to stream shows via Netflix.com to their television set, including episodes of NBC's "The Office" and Showtime's "Weeds."
"To me, it looks just like my cable," Johnson says.
In the past two years, nearly every major network show and many of the biggest cable programs have become available on the Internet. The virtual library of content includes everything from "Desperate Housewives" and "CSI" to "The Colbert Report" and "Mad Men."
Some of the biggest hits online are memorable TV moments. More than half of the people who saw recent "Saturday Night Live" skits featuring comedian Tina Fey as vice presidential candidate Sarah Palin watched the skits over the Internet, according to a survey of 500 viewers by Solutions Research Group. Nearly a quarter saw them on YouTube and 21 percent saw them on NBC.com or Hulu.com.
Many shows can be viewed for free and are accompanied by a dollop of ads that's small when compared with the number of commercial breaks on television. As a result, some cost-conscious consumers are ditching their cable subscriptions altogether.
"I'm saving a lot of money," says Tony Leach, a product manager at an online stock brokerage firm in the Bay Area. Leach canceled his $60-a-month cable subscription two years ago and has watched all of his favorite television shows on the Internet ever since.
The online television bonanza reflects a scramble by networks and cable stations to avoid the fate of the music business, which is still reeling from the effects of piracy and early missed opportunities to capitalize on the Internet.
Complete episodes of about 90 percent of prime-time network television shows and roughly 20 percent of cable shows are now available online, according to Forrester Research analyst James McQuivey. There are still notable holdouts, such as Fox's "American Idol" and current seasons of HBO series like "Entourage."
But by aggressively seeking to stay ahead of consumer behavior, content providers are also fueling the growth of this new form of distribution, and that could undermine the economics of the television business, critics say. More than 80 percent of U.S. households pay an average of $70 a month to get programming piped into their homes via cable, satellite or telephone companies. Most of the remaining households watch advertising-supported shows on their TVs - programs that are broadcast the old-fashioned way, over the public airwaves.
Within the next several years, media and technology executives say that a host of new technologies will make television access to online video a mainstream phenomenon.
Vudu Inc. already sells a $299 set-top box with a remote control that allows users to download television shows for $1.99 per episode. Microsoft and Sony both sell television shows that users of their Xbox 360 and PlayStation 3 video game consoles can download over the Internet for viewing on television sets.
Netflix subscribers can buy a $99 set-top box from Roku Inc. that streams videos on their television sets. The service is included at no extra charge in the monthly Netflix fee for renting DVDs.
Most television shows are available online only after a delay from their original air date, anywhere from a day to months later. Televisions networks take down many older episodes after a while, so users don't have a permanent library of some shows.
The online selection of live sports games is spotty as well. This season, for example, the National Football League will make Sunday night games available live on the Net, but those amount to only about 7 percent of all regular-season NFL matchups. Cable and broadcast news shows typically aren't streamed live on the Internet, unless there's a major breaking news event like Hurricane Katrina.
Research indicates that online video-watching is cannibalizing television audiences. According to a spring survey by Integrated Media Measurement Inc., a research firm that tracks media consumption, more than 20 percent of viewers in the firm's 3,200-person panel watched some prime-time network television online, up from roughly 6 percent in the fall. Half of those online viewers said they were no longer watching those shows on television.
"What this study is showing is that the long-vaunted convergence of the TV and the computer is happening faster than anybody thought it was happening," says Tom Zito, Integrated Media's company's CEO.