I think they'll probably lose more subscribers than they thought.
And their real arrogance in this long-term planning is to think their competitors aren't already planning to do exactly the same thing.
Amazon, iTunes, Hulu, Yahoo, and new services we haven't even heard of yet.
I'm not sure their strategy will pay off, but I understand what they're doing. And at this point, as you say, they own the market.
One of the biggest races going on right now is in the cabling, via fiber optics. AT&T has the big advantage right now with U-Verse. But access to these "super cables" that will allow the large bandwidth needed to stream high quality picture and sound (not just HD crap compression) is going to be a big component in who wins this race.
I'm guessing eventually it will lead to several antitrust law suits, akin to the accusations of a "monopoly" when the studios owned their own movie theatres. The supreme courts said they couldn't do that.
So who owns the lines and how they are shared or licensed is as important as who has the best/most content available.
"Jaws is the Citizen Kane of movies."
blocked: logan2, Diamonds3, Hamilton22