It makes sense that cable companies, the gatekeepers of the U.S. television
business, are adjusting to meet the new needs of television consumers. Theyre
not doing it simply by prepping streaming video options of their own to combat
Netflix (NASDAQ: NFLX ) style services. Time Warner (NYSE: TWX ), for instance,
has gone to great lengths to provide streaming video services to its customers
But that hasnt staunched the flow of lost subscribers to Time Warners cable
video services. TWX lost 400,000 video subscribers in 2010, and it lost 128,000
more during the quarter that ended in September . But even as its losing paying
television viewers to web-based competitors, Time Warner is making up for those
losses by providing those same customers with the Internet access to view
streaming video. Time Warner might not be selling the television content itself
anymore, but its still the gatekeeper. Time Warner gained 97,000 broadband-only
subscribers to its cable Internet service during the third quarter. It also
gained 89,000 customers for high-speed data Time Warners more expensive, faster
version of its Internet service during the same period. These consumers are
predominantly users upgrading from DSL (digital subscriber line) Internet
service, and they are upgrading because they need access to faster access to
large data transfers such as you guessed it streaming video. But in the long
run, isnt it bad for Time Warner to lose all those cable subscribers? Not
necessarily. As GigaOM s Ryan Lawler pointed out in August, the companys
broadband Internet business has yielded significantly higher margins over the
past three years than its cable TV business has. TWX doesnt have to share
broadband profits with content providers like News Corp . (NASDAQ: NWS ) and
Viacom (NYSE: VIA ), unlike its cable TV business. If it can continue getting
more subscribers to ante up for its high-speed service, promising access to
those content providers via the web, Time Warner could eventually do away with
its cable business entirely. Time Warner wont do away with cable television
service tomorrow, but during the coming years, consumers should expect streaming
television to become a larger and larger part of how the company sells its
broadband Internet service. The key will be convincing those aforementioned
content partners (and, in turn, their advertising partners) that the audience is
on the Web, not watching cable television. Time Warner has come into conflict
with TV networks in the past year in trying to develop its own streaming
options. The company released an iPad app letting its cable TV subscribers
stream certain content via Apple s (NASDAQ: AAPL ) tablet, and News Corp, Viacom
and Discover Communications (NASDAQ: DISCA ) forced them to remove their
channels from the app immediately . Time Warner will continue to come into
conflict over shared revenues if it tries to directly transform its cable
television business into a streaming television business. If its business model
is based on merely providing high-speed access to all those content providers
own streaming options , however, then its possible those conflicts can be
avoided. Streaming video is the future of television. Netflix might recently
have seen its business descend into madness and despair i.e., more than 800,000
lost subscribers and a share price hair cut of about 75% in three months but
that doesnt mean the companys streaming business model doesnt represent the
chief mode of delivery for television in the coming years. Need proof? Research
group Sandvine found that Netflix streaming uses up nearly 33% of U.S. bandwidth
during peak Internet usage hours. Simply put: Streaming video is what U.S.
consumers do on the Internet. Cable companies will survive the shift not by
switching to streaming business models of their own, but by redefining how they
monetize all their cable pipelines. As of this writing, Anthony John Agnello did
not own a position in any of the stocks named here. Follow him on Twitter at
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