How Paid YouTube Channels Could Kill Cable TV

When I travel around the world, the local TV channels are often limited. This used to be especially true in the United Kingdom, where I could only watch four or five BBC channels. Once the country got the Sky Satellite service and some cable networks, however, the options for U.K. viewers increased drastically.

Most boomers and silver surfers remember all too well that up until the late 1960s, we only had three TV networks in the States besides dedicated public access channels like PBS and community TV. But once cable networks came online in the 1970s, our channel selections also increased. Today most of us have at least 100 channels available.

That is the good news. The bad news is that today most of us have at least 100 channels available. Most people still watch shows on the major networks like ESPN or Fox and some opt for premium channels like HBO or Showtime. Smaller networks are catching on too thanks to original shows that become viewer favorites.

At the same time, the cost of a cable subscription keeps escalating even though most of us will never watch the majority of channels on offer. Cable companies argue that they bring users the most value by packaging all of these channels for (what they consider) a reasonable price.

For some people, cable packages are unaffordable and excessive. Why pay for so many Spanish channels when you don't speak the language, or so many cooking channels when you store sweaters in your oven? As a result, hundreds of thousands of people have cut the cable cord, opting instead for Netflix, Hulu, and other services that put OTA (over-the-air) programming online. While these too have monthly subscription fees, albeit lower than the cost of cable, I still find myself paying for a lot of content I don't want.

Interestingly, YouTube recently launched a pilot program to experiment with subscriptions to paid channels. For example, UFC fans can catch event replays, classic fights, and full shows on UFC's new channel for $5.99 per month and kids will be able to watch full episodes of Sesame Street once its channel launches. At the moment users can only subscribe from a computer (though new devices will be added soon) but they can watch paid channels on computers, phones, tablets, and TVs. (See a list of channels participating in the pilot program here.)

While only in its early stages, this concept shows how OTA video services could evolve over time, threatening cable companies and perhaps even Netflix, Hulu, and other streaming services. The key reason is that YouTube's model is specifically designed to let users pick and choose which channels they pay for, something that some political officials recently proposed to Congress when it grappled with the cable industry's perceived monopolistic position in the marketplace.

Without government intervention, the cable companies will never provide channels à la carte. If this happens, I believe it has to happen in the next major disruptive wave of video broadcast and that it will come via OTA services like what YouTube is launching. YouTube's channel choices are currently limited, but remember that this is only a pilot program. If it picks up steam, I suspect major TV networks might find this to be a good way to get direct distribution to their customers at long last. Premium channels like Showtime and HBO are already seriously looking at providing cable-free online access to their content.

This does not necessarily mean that subscription-based services like Netflix or Hulu will die off. There may be many who are still willing to pay for the convenience of having hundreds of channels and shows packaged under a subscription even if they only watch certain ones.

Media hubs like Apple TV and Roku already provide this à la carte experience to an extent but also offer broader subscription services like Netflix and, in Roku's case, Hulu. Even Netflix and Hulu may be hard-pressed to move to such an approach while Google and YouTube have no legacy issues to deal with.

It's too early to declare the death of cable TV as we know it, although if OTA online broadcasting gains steam, OTA services in general could force cable companies to alter their current approach to the market. YouTube's model could give people more control over their viewing content and costs. I know YouTube is also looking into bundling channels too, but by offering the first truly à la carte channel experience, it could lay the foundation for how users will eventually gain direct access to the content of their choice.