Internet Television, Without the Sports

NEW YORK ( TheStreet) -- Some people may be surprised the major studios are still willing to do business with Netflix ( NFLX). Especially that Walt Disney ( DIS) is apparently willing to do business with Netflix.

As the New York Post reported the other day, Disney has given the streaming service exclusive rights to some of its old movies, starting in 2016, for a reported $350 million , beating out Liberty Media's Starz network.

Our Rocco Pendola, who was a "bear's bear" on Netflix throughout 2011, came around this summer when CEO Reed Hastings started talking about the company as "Internet Television." Signing up exclusive content is the key to success, he thinks, regardless of cost.

Personally, I don't think the cost will be that high, because Hollywood is desperate to escape a trap of its own making. That trap is called "basic cable," in which subscribers buy a package of channels created by the operator, whether they want these channels or not.

What turned this great deal into a bad deal, and will soon turn it into no deal, is what customers want most. They want live sports.

What has been happening over the last few years is that sports has been slowly crowding entertainment out of basic cable. When a channel like AMC tries to get a small price increase, war breaks out, as summarized at this recent article in Minyanville.

But the operators seem to have no problem adding new "basic" channels covering sports teams and leagues. Comcast's ( CMCSA) NBC Sports Channel paid $250 million for England's Premier League. News Corp.'s ( NWS) Fox unit paid about $1.5 billion to eventually control the YES Network of the New York Yankees, then moved to buy the Cleveland Indians' network, writes the New York Daily News.

All the moves around college football these days are about cable networks. Rutgers and Maryland are joining the Big Ten because the Big Ten Network wants into East Coast cable boxes, as CBS Sports notes. Even individual teams are in the cable network game, like the University of Texas' Longhorn Network, produced by Disney's ESPN.

It adds up. Sports now represents half of your cable bill, as Miami's CBS (CBS) affiliate reports. If you don't like sports, tough -- you're paying for it anyway. While they're paying big bucks to show you Rutgers or Stoke City, cable operators are turning the screws on entertainment channels.

Small wonder, then, that more people are dropping cable and satellite, as Reuters reports. No one ever died for dear old Rutgers, and no one wants to go broke for it either.

This is a box from which the entertainment companies have to get out. Netflix is one way out. But here's another -- Apple TV. Not the little receiver Apple ( AAPL) is selling today, but the long-rumored big-screen TV and programming device Apple is expected to introduce next year, as CNET reports.

An operating system that replaces the cable box, that lets you buy all the entertainment you like for less than what you're paying now for cable, is how Hollywood gets out of sports' way. Unbundling, once a dirty word in Tinseltown, is -- thanks to the increased cost of sports -- becoming the only hope.

At the time of publication the author had a position in AAPL.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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