Why the cable industry should fear new streaming app

Using technology it purchased from Intel last year, Verizon has been open about getting into streaming media. Photo / Thinkstock

It's the holy grail for TV viewers who are fed up with sky-high cable bills: A do-it-yourself bundle made up of channels you chose. The problem? By the time you add up separate subscriptions to Netflix, Hulu, SlingTV and all the other streaming video apps you want, you may be paying the equivalent of a regular cable bundle, anyway.

But Verizon may be poised to change that equation. Using technology it purchased from Intel last year, the telco has been open about getting into streaming media, too.

Whatever it comes up with, according to Chief Financial Officer Fran Shammo, might include not charging a subscription fee.

In a recent interview with Reuters, Shammo said he could see Verizon offering streaming video "not necessarily (on) a consumer-pay model" but using an approach that relies largely - if not exclusively - on advertising.

That would make it much more affordable to sign up for apps like Verizon's, and hints at a future where cord-cutting isn't such an expensive proposition.

The details of this model will prove to be extremely important, but the big takeaway here is that Verizon's service theoretically could be priced at zero (or in general, substantially less than the $15-20 per month many of the major apps such as SlingTV and HBO Now expect to charge). This won't lead to all the providers abandoning subscription fees overnight just so they can reach cord-cutters; after all, one of the best parts of watching HBO is that a full episode of Game of Thrones is, in fact, an hour long.

The prospect of paying much less for streaming video raises some questions. Would Verizon be collecting data on your viewing habits and making money by selling that data to others? It's not an outrageous idea; AT&T, for example, already offers an Internet plan that gives you a discount in exchange for letting the company see your browsing history.

And can Verizon scrape together enough advertising revenue to cover the significant costs of obtaining premium cable content? As Google Fiber has learned, paying for programming is a pricey business.

Still, what Verizon's considering poses a risk to the cable industry in a way that the other apps on the table don't. If advertising can subsidise even a fraction of what would otherwise be a hefty subscription fee, it could change the math for potential cord-cutters. And if more apps successfully made the leap to ad-only or ad-first business models, consumers could be encouraged to flock to these services.

Spokespeople for Verizon and the cable industry declined to comment.