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Why it’s so hard to disrupt the TV industry

There are a bunch of reasons why snappy upstarts like Netflix haven't made much of a dent in the business of existing TV and cable providers. One of the most powerful is discussed by Sanford Bernstein analyst Craig Moffett in this Bloomberg piece today. Turns out cable companies are among the biggest providers of Internet service to individual consumers and can price Netflix users off the charts.

Cable companies see usage-based billing as a way to limit the appeal of online services like Netflix and Hulu LLC, and reduce the threat from new entrants like Inc. (AMZN) and Google Inc.

“It’s the reason why Apple or Google would inevitably be reticent about committing a significant amount of capital to an online video model,” Moffett said. “You can’t simply assume just because you can buy the content more cheaply, you can offer a product that’s cheaper to the end user.”

Netflix and Hulu’s subscription services have driven up Web usage at peak hours once reserved for watching TV. Google, Amazon, Apple (AAPL) Inc. and premium channels HBO and Showtime have also put shows online and followed viewers onto mobile devices like iPads and Android tablets.

-Bloomberg, November 30, 2011

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Posted by Aaron Pressman

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