Is Cable Finally Facing Disintermediation?

Under what conditions would a consumer be able to get rid of their multichannel video service and use alternate technologies?

The answer is more complicated than might first appear. Part of the answer requires knowing what functional substitutes actually exist for the types of content any single user actually wants to watch, when they want to watch, and how much that content is worth.

Only after that is determined does technology actually matter. It increasingly is easy to substitute a stand-alone digital video recorder for the same function provided by a multichannel video provider's own set-top decoder, for example.

So consider the decision matrix for a user who cannot live without the convenience of a DVR. "Cutting the cord" might make sense for a user who only wants to watch what is available over the air, who can get decent signal reception, and knows how to use Netflix to watch movies.

That option will not work, even if a user wants to do so, if any of the essential programming is "cable only."  To use but one example, a user who demands Fox News or Fox Business must typically buy an "expanded basic" package just to get those one or two channels.

Neither is available on a streaming basis. If that consumer does not actually have to "see" the programming, but only "hear" it, the one available option is to buy Sirius XM service.

Alternatives slowly are growing, but you get the point: technology alternatives are viable only when the content one wishes to see actually is available through alternate channels.

The decision might be a lot easier if a user's favorites are those TV series available on Hulu, for example.

But there again, the "when I want to watch" issue has to be considered. Hulu content will typically be time delayed by 24 hours. If a user really views some show as an "appointment," that 24 hours can be a long time.

Nor will content owners be in a huge rush to make alternate viewing to easy. Content companies make $30 billion a year licensing content to cable, satellite and telco video providers. They aren't dumb.

Content owners are not going to make it too attractive to watch that licensed content if it means damaging the existing $30 billion.

The point is that technology increasingly is available to create alternate channels. But technology is not sufficient to cause robust alternate channels to develop.