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Cable-TV Industry Girds for New Threats


Doug Byles has had it with his cable-television bill. The 44-year-old Walnut Creek, Calif., home builder said he's paying more than $130 a month for basic service with two premium and eight high-definition channels.

"All I really watch are the HD channels, so I'm paying $130 for eight channels?" he said. "That's crazy. I'm going to drop my cable."

Frustrated cable subscribers like Mr. Byles who aren't tech savvy used to have only one option: satellite television. But as evidenced this week by the Consumer Electronics Show in Las Vegas, those like Mr. Byles now have more choices, thanks to the Internet becoming a bigger distributor of entertainment, and new gadgets and other developments that make it easier to show the Internet's content on TVs.

"This is finally becoming a reality and benefiting companies like mine," said Jason Hirschhorn, president of SlingMedia Inc., which expects to introduce technology soon to clip content from the Internet and ferry it to any TV screen anywhere.

As the Internet becomes a larger provider of video, and technology makers ease the flow of that content to television sets, it threatens the cable and satellite industries. Currently, the number of subscriber dropouts remains relatively small, according to cable and satellite operators, but anecdotal evidence suggests those affected by a souring U.S. economy are more inclined to keep their less-expensive Internet services than their cable-TV subscriptions.

Meanwhile, the next few years are going to be pivotal as a big pool of potential customers comes into play. In February 2009, some 21 million households -- or more than 69 million TV sets by some estimates -- will lose their source of free over-the-air programming when broadcasters begin sending those signals in a new format because of a federal mandate.

While cable and satellite companies say this presents an opportunity for them to gain subscribers, the technology on display at CES is proving that these households will have an even easier time living without a cable or satellite subscription and, in some instance, will see their TV choices improve in both scope and quality.

"This is an enormous opportunity to increase the over-the-air audience," said National Association of Broadcasters Vice President Jonathan Collegio. "The availability of superior high definition over the air channels is already bringing people back to broadcast TV."

Jeff Weber, vice president of products and strategy at AT&T Inc., which has about 140,000 cable subscribers, said cable dropouts "have to be getting bigger, by just how much we'll see."

At CES this week, the focus of large technology makers was on making it easier to ferry Internet content to TVs.

Sony Corp. introduced new Bravia TV sets with an optional feature to access Internet programming from a select handful of Internet partners including Time Warner Inc.'s AOL, Sony Pictures Entertainment, Yahoo Inc. and Sony's own user-generated-con tent Web site called Grouper.

TV makers including Fujitsu Ltd., Matsushita Electric Industrial Co.'s Panasonic and Sharp Corp. are introducing TV sets that can plug directly into an Internet connection, thus making it much easier to transfer the growing amount of quality video content available on the Internet directly to televisions or to transfer the data from personal computers to TVs.

And the gear keeps coming. Sandisk Corp., a maker of digital storage products, showed off its Take TV product for sending videos stored on computers directly to most televisions. MatrixSystems Inc. and other companies have introduced plug-and-play boxes to ferry content stored on personal computers directly to TVs, some wirelessly and to TVs that are up to 200 feet away.

Meanwhile, Intel Corp. announced that it will soon ship chips that are designed to enable a bevy of devices, but most importantly televisions, to connect to the Internet.

Cable and satellite operators in the U.S. recognize the potential threat. These operators have reacted by beefing up the capabilities of the set-top box.

Some are capable of new interactive features like karaoke, as on display in households in Korea and other countries.

To be sure, all the gear on display at CES this week may prove still too sophisticated for some, thus limiting its potential impact for now, according to Forrester Research analyst Josh Bernoff.

Yet, the interest is there. Forrester Research found a fifth of consumers surveyed were interested in a device that sends content accessed or stored on personal computers to TV. Yet this is a price-sensitive audience; that percentage fell to 3% if the devices needed to make the transition cost just $100.




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