Article at a glance:

Fast-forwarding digital cable

Cable companies that have invested billions of dollars upgrading their networks for digital have been disappointed to find that viewers are churning even faster than they did for analog cable—unless they are offered programs and movies on demand, a technology that makes the digital premium worthwhile to them. There is a catch, however: the networks are reluctant to offer programming on demand because this makes it easier for viewers to skip advertisements and thus costs the networks revenues.

The take-away

Television networks must be compensated for lost advertising revenues if they are to provide quality programming on demand. Compensating the networks will create a virtuous circle: customers will pay more for digital cable, and this will help cable companies make good on their upgrade investment.