Is Comcast's Stream a sign that the cable industry is tired of swimming upstream?

http://www.theguardian.com/media/2015/jul/13/comcast-stream-web-based-add-on-service-internet

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Will traditional cable die the death of a thousand cuts? Comcast said late on Sunday it would begin selling a web-based service called Stream, with content from the major broadcast networks and PBS and HBO. The programming will be available as a $15 add-on to Comcast’s internet-only package.

Comcast’s offering is just the latest in a series of smaller, cheaper video packages. Some still use a cable box, like Comcast’s own Internet Plus and Verizon’s contentious – and possibly contract-breaking – plan to offer a do-it-yourself cable bundle. But others are adopting the popular web-based model pioneered by Netflix.

Comcast’s addition of the latter – first reported in the New York Times – signals the willingness of larger cable operators to get in on the on-demand act to a greater degree. That trend, said BTIG analyst Rich Greenfield, may decimate the old-fashioned cable landscape.

Related: I've cut the cord – but byzantine 'cable bundle' pricing still has me baffled

Cable isn’t on its last legs by any stretch of the imagination, but if the 100m-strong market for US pay-TV subscriptions is an iceberg, that iceberg may be calving.

“Why couldn’t 20m homes find these smaller, cheaper bundles attractive?” asked Greenfield.

“I don’t think we’re going to go from 100m subs to 50m,” he cautioned, but he said this one offering from Comcast might be enough for “a few million people” who want to cut down on monthly expenses.

Stream includes some bells and whistles that Netflix and Hulu do not have, including 20 hours of DVR storage for live programming. It will also have commercials, with the exception of content from networks like HBO that are not ad-supported.

“You see more and more [video providers] pushing out bundles without the vast majority of the cable networks, especially the really expensive networks such as ESPN,” Greenfield said. (“Expensive”, in this context, refers to the affiliate fee paid to a network by a cable company.)

The industry average affiliate fee for a subscriber is 25 cents a month. ESPN pulls in a full $6.55 each month from essentially every one of the nation’s 100m cable subscribers, according to recent estimates from SNL Kagan. Ballooning affiliate fees and bundling are among the reasons US cable bills are so high.

Other companies providing streaming television content, or on the cusp of a launch, include Netflix, which saw its stock target raised to $700 a share by Goldman Sachs on Monday; Amazon Prime; Google Fiber; Apple TV; and Hulu, a joint venture between Comcast-owned NBCUniversal, Fox and Disney. Netflix has 40.3m subscribers in the US, and 62m worldwide.

Related: Cutting the cord: a look at the pros and cons of quitting cable

TV networks are very conservative in this market, in order to avoid cannibalizing themselves. Ultimately, however, they might have to follow the consumer.

When networks provide television content over streaming, rather than cable, Greenfield wrote in May: “It appears as if programmers are hamstringing [streaming services] to ensure they do not become overly popular (the goal appears clear – protect the legacy business model).”

That may change.

There are myriad advantages to the model for cable operators: Comcast can sell a much cheaper network package without ESPN or the raft of little-watched networks like WeTV or VH1 Classics that are part of any deal with their essential corporate siblings (AMC and Nickelodeon respectively). It just rarely gets the chance to do so, given the way those deals are negotiated by the networks.

And while traditional cable deals probably aren’t going to change, digital streaming contracts tend to be more fluid, because they are seen by the networks as pushing viewership back to linear TV at best, and triaging the slow leak of subscribers to web-based services at worst.

If in providing web-based services at an attractive rate – HBO’s own service, HBO Now, costs $15 a month by itself – companies like Comcast can retain internet subscriptions, they can keep that valuable revenue stream intact and growing as demand for traditional cable declines.