By executing these three strategies a Pay TV operator will "enhance their defensive position, capture the attention of the Internet generation and generate millions in annual revenue going forward.

Colin Dixon, senior analyst with The Diffusion Group and author of a new report on Pay TV, points to the nascent but emerging threat from online video services as the primary reason why Pay TV operators must aggressively pursue online video strategies. "More than half of adult Internet users are interested in broadband TV service," notes Dixon. "So much that they would consider cancelling their existing Pay TV subscription if the online service was priced appropriately."

According to Dixon, it will not be long before a variety of companies including TV manufacturer's web-based aggregators, and content providers look to tap into the Internet and compete more directly with Pay TV operators. "As TV-based web connectivity becomes more prominent, and as web-based content providers more fully exploit these new connections, the 'local cable company' becomes just one of many conduits serving the TV screen. This means that incumbent TV providers risk becoming just another TV input, even an icon on another company's interface."