Netflix, Aereo and Unbundling Cable

Netflix, Aereo and Unbundling Cable

NEW YORK (MainStreet)—If you're a fan of dry, quirky humor, then you've probably heard: "Arrested Development" is back after a multi-year hiatus. And this time, it's on Netflix, rather than a major television network like Fox, which canceled the show the first time around.

This is great news for fans (though the first few episodes are a bit slow, many people agree that the season hits its stride in the later episodes), though it's less-than-great news for traditional TV networks.

Netflix has been diving into original programming since earlier this year, when it released the original series "House of Cards," which has received rave reviews. And, of course, viewers need only pay $7.99 a month for streaming privileges on Netflix, which stands in stark contrast to the often $100 or more a month charged by cable companies.

In 2011, the average cable bill was about $128, up from $48 in 2001, meaning that cable rates have nearly tripled in a decade. So, as much as Netflix's bold foray stands for fun, interesting content, it also may signal a shift away from the old-school cable model, in which users have to pay a pretty penny for a large, bundled package of channels that they might or might not want—and which, now, disappointingly lack some of the newest Netflix shows.

The cable industry seems to have realized that rising prices are a deterrent for users. In an effort to keep costs down, Verizon has suggested a new model: pay-per-usage.

Verizon's new plan may be the first step toward cable companies unbundling their content. Although Verizon, the sixth-largest provider of paid television in the U.S., isn't prepared to offer an à la carte viewing to consumers, it has started talking to midsized and smaller media companies about paying for their content based on viewership. Right now, Verizon pays networks for their content, so this shift would mean that networks getting more eyeballs would also get more cash. If Verizon manages to spread this model to all of its channels, it would balance out the very unequal power among networks: Last year, ESPN averaged slightly less viewership than USA Network, yet Verizon paid ESPN an average of $5.04 a month per household, compared to USA's 68 cents a month.

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