The Internet as a Celestial TiVo

Abstract

It appears that the Internet is soon going to fulfill its potential to become a giant on-demand repository of television shows (and movies) available asynchronously. As companies such as Netflix and Hulu increase their activities in this sphere, there are many unanswered questions about the impacts of this transition. In this paper we attempt to foretell the impact of this shift on one key aspect of television viewing: the amount of time viewers devote to it. We use cable and satellite television’s impact on viewing as a proxy for the likely impact that future Internet transmission of programs will have. Using country-based panel data going back to the mid 1990s we find that the increased variety brought about by cable and satellite has had virtually no impact on time devoted to television viewing. We discuss the import of this finding for Internet business models of television transmission.

Keywords: internet, netflix, hulu, television, product variety

JEL Classification: L8, O3, Z1