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no tvFor the past several years, telcos have looked on in horror as their cell phone owning subscribers - particularly younger ones - decided landlines are purely optional. Inevitably consumers are making the same shift with their television and DVD viewing habits.

No one has the exact figures, but it's estimated some 1.1 percent of US households are TV-free, some one percent of the market. Certainly the current economic climate isn't helping as consumers look for ways to pare down their monthly expenses. Electricity may be mandatory - but cable, satellite and daily newspaper delivery? You can get all that stuff free online.

As viewers shift to YouTube, Hulu, and streaming services offered by television networks, not to mention streaming video provided by the leading online DVD rental companies such as Netflix, global entertainment conglomerates such as Disney and Time Warner are seeing an impact to their bottom lines that will likely last well beyond the current economic climate.

"People, particularly young people, are saying 'all I need is broadband,'" Time Warner Cable Chief Executive Glenn Britt said recently. "The danger here is...people will choose not to buy subscription video."

The Digital Entertainment Group, a trade organization, estimates that last year, DVD sales  fell 8 percent to $21.6 billion, in the wake of a lackluster 2007. A $14 billion industry is withering.

And a ripple effect is beginning. Less viewship of traditional media channels translates into less advertising, fewer cable and satellite subscriptions, reduced pay-TV viewership, and not only sinking software sales, but also a lessening demand for hardware.

The bright spot? Hardware sales for devices that connect TV sets to the web are expected to skyrocket. And what's bad news for traditional broadcasters will translate into a postive story for Web-based video advertising.

Rebecca Lieb

Published 10 February, 2009 by Rebecca Lieb

Rebecca Lieb oversees Econsultancy's North American operations.

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