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Thinking of Cutting the Cable Cord? Here Are Your Options

Aaron Pressman
The Exchange

Google (GOOG), it seems, is the latest major Internet company looking longingly at the $100 billion U.S. cable television market.

Google already offers a traditional cable-like TV service in the few cities, such as Austin and Kansas City, where it sells its mega-fast gigabit Internet service. But the company is now talking to TV channel owners about licensing content for a service anyone could subscribe to over a regular Internet connection.

The rumored effort comes as many others – including Sony (SNE), Apple (AAPL) and Intel (INTC) – are similarly reported to potentially be seeking licensing rights to typical cable TV fare for new Internet and mobile services.

But consumers don’t have to wait for the rumors to become reality. Millions have already dropped standard cable packages for one or more of the available online entertainment services.

Online subscriber TV

One of the most popular alternatives to cable is online, on-demand video. These services, led by Netflix (NFLX), charge a monthly or annual fee and let customers choose what and when they want to watch from vast catalogs of movies and TV shows. Customers can watch their selections on the Web, on special apps for mobile devices or via a wide range of hardware ranging from set-top boxes such as Roku or Apple TV to Internet-connected TV sets and disk players.

Netflix is the market leader, reporting 36 million total subscribers. It charges $8 a month. Hulu, a joint venture of Disney (DIS), Comcast (CMCSA) and 21st Century Fox (FOX), charges $8 a month for its premium "Plus" service. Its strength is in TV shows, especially shows currently on the air. Amazon (AMZN) includes access to its instant video service as part of its $79 a year "Prime" service, which also gives customers free shipping on purchases.

Online, on-demand downloads

Another popular option for cord cutters is the growing array of video programming available to download onto computers and mobile devices so it can be watched later without an active Internet connection. Customers typically buy or rent movies and buy TV shows.

For purchases, Apple’s iTunes market is the giant, selling about two-thirds of all downloads, according to consumer market research service the NPD Group. Microsoft’s (MSFT) Xbox service is far behind in second place, selling 10% of movie downloads and 14% of TV shows. Amazon’s video download service, distinct from its Prime instant video because customers have to pay for each show or movie individually, is in third place with around 10% of movies and 8% of shows. Amazon offers far more movies and shows on the pay-per-download side.

For movie rentals, Apple captures about 45% of the market, followed by Amazon, VUDU – which is owned by Wal-Mart (WMT) – and Xbox.

Another option, which has yet to catch on in a big way, is the movie studios’ joint effort, Ultraviolet. Consumers who buy special DVDs or Blu-Ray disks can access a code that can be redeemed online for a digital copy of the same feature on Ultraviolet. The movies can then be watched via Web streaming (including on VUDU), special apps or on some Internet-connected TV sets and set-top boxes.

Hardwired to the hardware

The final category of cable alternatives require that consumers purchase additional hardware. Again, Apple is the leader here, as its Apple TV black box captured 56% of the market last year, according to Frost & Sullivan. The box connects to a TV set and the Internet. Customers get access to the entire iTunes store as well as many partnered services – for which they might have to pay extra – such as Netflix.

The Roku, a similarly compact black box, was in second place and offers similar capabilities. In third place was Tivo (TIVO), which pioneered the concept of recording television shows to watch later and skip commercials. Commercial skippers are usually also cable subscribers but the Tivo box offers many other Internet services, including Netflix, Hulu and Pandora (P).

Aereo is one of the newest and most controversial hardware players. Aereo assigns customers a tiny antenna to pull shows from over-the-air broadcasts, thus limiting the service to broadcast networks. For $8 a month, customers can watch shows live or recorded earlier via Web streaming, special apps or on a Roku (Apple TV users can use Apple’s Airplay feature to send shows from an iPhone or ipad to a TV set). The TV networks have sued Aereo claiming copyright violations but so far courts have approved the offering.

Not quite cut

For people who want to keep their cable service, there are a growing number of ways to watch even when you’re away from the TV connected to your cable box.

Among the most popular options for mobile viewing are channel-specific apps such as HBO Go and Showtime Anywhere. The apps run on mobile devices and give free access over the Internet to the channels’ content libraries. The catch is that, at least so far, you have to provide your cable service credentials to watch. Only HBO cable subscribers can tune in via HBO Go, for example.

On the hardware side, a Slingbox hooks up to a cable set-top box and connects to the Internet. Customers buy a Slingbox, starting at under $200, and pay no additional fees. A Slingbox owner can remotely control their cable box and watch anything on their TV via the Internet and special apps for mobile devices.

The bottom line? There have never been more ways to be a couch potato.