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Convergence Consulting Group expects a decrease in the number of customers signing up for Internet streaming services throughout 2012 and 2013 because of rising licensing costs

With the rising popularity of video streaming services like Netflix and Hulu, many believed that customers would say goodbye to traditional cable services and flock to more affordable internet-based alternatives. However, a new report says otherwise.

Convergence Consulting Group, a Canadian research firm, released a new report this week that shows a jump in video streaming popularity from 2008 to 2011, but predicts a decline in 2012 and 2013.

The report found that 2.65 million Americans left their cable TV providers for internet subscriptions between 2008 and 2011. Cable TV packages were just too expensive while internet subscription companies like Netflix offered low monthly prices for a variety of content that can be viewed on several different devices.

In 2011, only 112,000 U.S. citizens signed up for cable TV packages. This is a significant drop from 272,000 who signed up in 2010.

However, Convergence Consulting Group doesn't see this trend lasting. In fact, it expects a decrease in the number of customers signing up for internet streaming services throughout 2012 and 2013 because of rising licensing costs.

In 2010, Netflix had to pay $1.1 billion in streaming rights. In 2011, this price jumped dramatically to $3.9 billion. With rising costs, Netflix was forced to up its subscription prices from $9.99 a month for video streaming and DVD rental-by-mail to $15.98 for both, or $7.99 for video streaming or DVD rental-by-mail separately. This move angered customers to the point that Netflix was forced to lower its Q3 2011 subscriber forecasts from 25 million to 24 million. Other issues, such as limited streams and a DVD spinoff company called Qwikster (which was later killed off), caused customers to leave as well.

Convergence Consulting Group only sees streaming rights prices increasing annually from this point forward, and predicts that video streaming companies will have financial troubles ahead due to these price increases. In other words, the future of Netflix, Hulu and others is unclear for now, and high prices may lead to less relevant content, meaning fewer incentives for customers to join.

Last month, Netflix said it planned to join forces with cable services at some point in the future in order to compete with HBO Go, but Comcast later shot the video streaming service down, saying it had no plans to offer Netflix on its Xfinity TV service.

Source: Yahoo

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Pure rubbish
By la-viewer on 4/7/2012 4:55:37 PM , Rating: 2
Did the cable companies pay for this report? This report fails to mention the differences between business models. Netflix writes checks, so their costs will go up for sure. And if they raise their prices, it'll still be cheaper than cable.

Hulu does revenue sharing and from recent articles they pay more per user than the other streaming models. Guess commercials are a good thing after all.

What this study should be talking about is the demand and the need to kick up revenues from the growing crop of online viewers.

I haven't had cable for over a year and I LOVE it. I don't even have a TV now. I watch everything online. The majority of it through Amazon or Hulu or iTunes. I like that I can pay for some shows and see other ones for free on Hulu. But I must be honest - if HBO had the balls to offer an online only service for their Originals only for $20 a month - I'd subscribe in an instant. Sure they made $28 from me on Season 1 of Game of Thrones, but I would've paid $200+ for the privilege to have seen it while it was on along with other HBO Originals... Cash on the barrel!

As for sports, I just watch the NFL and again I'd happily pay $20 a month to watch a select amount of teams or just to follow my team alone! And I'm not the only one who's willing to pay.

And there's nothing stopping the NFL from doing this, because we all know that the only group that makes money off the NFL - is the NFL. So why isn't the NBA doing this or Baseball (and if they are already in some or all markets, then I stand corrected)?

Granted TV rights and syndication and licensing are big business and online is the new frontier. But it's filling up with a market of people who are willing to pay ala-cart. So sell it to us. In the age of the debit and credit card you can get the money right away. Price it right and you'll have some easy money.

Why isn't it happening? I know why. Because these big brave men of industry are nothing but a bunch of fat, old, scared, weak and out of touch men. And I'm being a little harsh... this is still the dawn of the new age and the money is smaller than traditional methods - but I thought we were a nation of capitalists?

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