Google's Next Possible Target: Cable

Jacob Harper  |

Google Inc. (GOOG) has their thumb in a lot of pies, but they’ve largely stayed out of paid subscription content. The tech giant, so far, has appeared relatively uninterested in edging in on the 29 million customers that subscribe to Netflix, the 4 million subscribe to Hulu Plus, or the 100 million that currently have a TV cable subscription. But following recent meetings with major media companies, rumored to be about Google streaming cable via the internet, Google could be poised to enter the telecommunications game, and expand their massive empire into yet another economic sector, and possibly signal the final death knell for cable companies.

Google already owns YouTube, the most popular video site on the internet. So they’re no strangers to internet content. But getting into paywalled video subscription service would pit Google directly against several companies. They’d be going up against Netflix (NFLX) and Hulu, Amazon (AMZN) (and their Prime system) and Apple (AAPL) TV. And, of course, teh cable companies. Despite the success of internet streaming companies, and the emergence of streaming company-manufactured content, intret subscription revenue is still dwarfed by the money in cable. The total revenue of pay TV is currently around $150 billion a year. Popular cable channel ESPN alone garners $11 billion a year in revenue, and 60 percent of that comes from cable subscription fees.   

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What Google could offer is an “unbundling” of cable packages. The way most cable companies are set up, a customer isn’t allowed to pick and choose what channels they get. They have to buy several at once, even if they are seeking mainly one channel like ESPN.  

As with many of their forays into new revenue streams, their decision is not just an opportunity but a preventative measure. Apple and Intel are already working on getting TV on the internet. And the cable companies are fighting tooth and nail already. After all, if users could unbundle their channels, and have the option of picking what shows they watch when, why buy a package from a company like Comcast (CMCSA) or Time Warner (TWX) at all?

Intel has already met resistance from Time Warner, and the US Department of Justice is getting involved. And it appears that old-school cable companies are the ones that have the uphill battle. Making deals to specifically block internet companies from making deals with channels could be a violation of antitrust laws. In June 2013 Senator John McCain introduced a bill that would address this issue specifically, and make it easier for internet companies to get into the business. Of special note is sporting events, which are now subject to "blackout" laws. If John McCain's bill was successful, this would open the doors for internet companies to cover events like March Madness, curently split between four cable channels.

While language in cable contracts doesn’t specifically single out internet companies, it’d certainly geared that way. BTIG Research analyst Richard Greenfield wrote the exclusionary practices of traditional cable companies is “most certainly is bad for consumers, as it limits competition and prevents the emergence of distributors who can provide revolutionary new ways of experiencing”  television.

While Intel is leading the charge, if they prove successful and (as planned) their streaming TV service is online by the end of 2013, Google could easily follow suit. They have the cash and clout to really make a dent, and if they are able to get into TV content, especially before rivals Apple or Sony can, it could be  a godsend for the company.

Google's stock is down .17 percent to $918.01 a share. They're up 29.70 percent on the year.

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