Of High-Speed Internet Access

1) What competitive forces have challenged the television industry? What problems have these forces created?

Widespread use of high-speed internet access, powerful PCs with high resolution display screens, mobile handheld devices such as iPhones and iPads, and file sharing services have seriously challenged the television industry. Coupled with the fact that many movies and televisions series have been made accessible on these devices for reduced prices and sometimes even free have also added to the challenges. With companies such as Hulu and Netflix, many people are able to access several of the programs, if not all, that they would normally watch on television for fees at less than $10 a month. Television companies are having to invest more money into keeping up with the advancement in technology by making many of their programs accessible through the internet as well. The television industry is at risk because many of their customers are choosing to drop their television services altogether and take advantage of the low prices offered by the online streaming companies.

2) Describe the impact of disruptive technology on the companies discussed in this case.

According to a study in 2010, nearly 800,000 households had dropped their cable or satellite subscriptions and turned to more web-based services such as Hulu, mail order video subscription such as Netflix, over-the-air broadcast programming and downloadable shows from iTunes. While this only represents a very small percentage of television subscribers, it is expected to double to 1.6 million. If this trend continues and more and more people continue to move to more web-based services, then the television industry could very quickly become extinct as we know it.

3) How have the cable programming and delivery companies responded to the Internet?

Many of the companies have responded by creating web-based sites such as Hulu. Hulu was created to air shows from several televisions companies such as NBC, Fox, ABC, USA Network, PBS, Comedy Central, FX, Sundance, Bravo, and Oxygen. Hulu also syndicates its programming to websites such as AOL, MSN, Yahoo, Facebook, and Fancast.com. Hulu is funded by advertisements. This gives them the ability to offer some programming for free, as well as offer a monthly subscription at a low rate which gives customers access to many more shows. Because of this advancement, these televisions stations have been able to continue making a profit by targeting their customer's through a different medium.