The Internet as a Celestial TiVo: What can we Learn from Cable Television Adoption?

It appears that the Internet is soon going to fulfill its potential to become a giant ondemand repository of television shows (and movies) available asynchronously, greatly increasing the variety of shows available at a moment in time. 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 Internet-induced increased variety on the amount of time individuals devote to viewing television. 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 the amount of time devoted to television viewing. We discuss the import of this finding for Internet business models of television transmission.