Will streaming services kill the free-to-air golden goose?

Streaming video on demand is gathering pace around the world and could threaten the commercial free-to-air broadcasters.

In much the same way physical newspapers suffered structural damage as the internet virtually replaced them, free-to-air television faces a similar threat.

The appeal of watching what you want, when you want, with minimal or no advertising, is driving strong demand for streaming services. Netflix is the content king in this regard, and despite geo-blocking, an estimated 200,000 Australians have signed up to Netflix, paying as little as $11 a month for the service.

Of course Netflix is but one of the streaming video on demand (SVoD) providers with HBO, Hulu, iTunes, Crackle, Amazon, Vudu, Youtube and even Australia’s Quickflix Limited (ASX: QFX) serving movies and TV shows on demand.

Pay TV is also suffering, with news out this week that Foxtel has halved its subscription fees. Australian consumers have long complained that Foxtel fees were too expensive, and subscriber numbers have virtually stood still for years. Foxtel’s Presto movie service fees were slashed in half last month from $19.95 to $9.99 a month.

Streaming services are a major threat to the free-to-air networks and their large TV advertising revenues. For some years, those revenues have been migrating away from free-to-air.

Seven West Media Limited (ASX: SWM), Ten Network Holdings Limited (ASX: TEN) and Nine Entertainment Group (ASX: NEC) are fighting back though, launching their own broadcast technology called HbbTV, or Hybrid Broadcast Broadband TV.

HbbTV works through a set top box or internet-connected TV, and allows consumers to access and store digital video content. It basically brings free-to-air onto the same level as pay TV. In Australia, HbbTV is known as FreeviewPlus, and the networks are reported to be considering new revenue models to access the services.

The broadcasters may be behind the eight-ball, but they are running rapidly to try and catch up – and they will need to – or see their traditional businesses destroyed.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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