Recently I reviewed my cell phone and cable bills side-by-side and was surprised. First, both bills were almost the same. Secondly, I realized that while I loathe paying my cable bill, I rather cheerfully pay my cell phone bill. Why is it that even I, a loyal former cable employee and customer, viewed my cable bill more negatively than my wireless bill? Was it because Clark Howard talks so much about saving on cable bills or countless stories discuss cord cutting? If both bills cost the same, why are media outlets not equally outraged by cell phone costs?
After further thought, I wondered if MSOs might be more responsible for their subscribers’ price outrage. During contentious content negotiations, in CEO interviews and presentations, it appears cable provides one message to its customers: My services are overpriced. Yes, the explanations highlight programmers’ roles, but the subscribers hear overpriced services. Cable’s constant discounts only reinforce the overpriced message. If the Lakers offered you steeply discounted tickets for floor seats, would you question paying full price?
Although programming costs are infuriatingly high, cable’s message and pricing should switch from cost-centric to value-based. Your cable bill, especially the video component, represents an entertainment choice. I submit cable’s entertainment value (hundreds of channels, thousands of VOD choices, time-shifted DVR) is exceptional. Compare your cable bill to your cell phone bill and cable will likely win in terms of value. Then, compare your cable bill to a family of four’s trip to the movies or to a restaurant for one evening’s mediocre dinner. Cable wins!
Scary as it seems, if MSOs extolled their entertainment value more, we might cheerfully pay more. If I’ve lost you, let me offer a story about two guys, both named Steve. The first Steve, who sees pricing through cost-based lenses, thought no one would pay over $500 for a product. The other Steve took a value-based approach and told us how this product was like nothing we had ever seen; it was easy to use; and, one more thing—it was just so cool. The former Steve is Steve Ballmer and the latter is Steve Jobs. The product was the iPhone. Prior to Apple’s value marketing, most of us, including me, would have agreed with Ballmer. Yet, I’ve bought three iPhones already and can’t wait for the next one. Was the time-shifted viewing revolution (VOD and DVR) a missed opportunity? Or, does an opportunity still exist since VOD is mostly free and DVR is under $20 per month?
Arguing about program costs is a no-win battle. Here is cable’s best argument: the industry offers great entertainment (via TVs, PCs, tablets, etc.) at more reasonable prices than other entertainment options. Instead, more cable companies continue to ignore the entertainment message. Some even publicly eschew video, the bundle’s entertainment anchor, in favor of data. Much like the TV itself is a delivery tool for video entertainment, data is a delivery pipe for information and entertainment, including video entertainment. Until water cooler talks become more about data speeds than last night’s episode of “The Voice,” it seems subscribers will view video as cable’s entertainment anchor. I suspect cable’s growing list of competitors would agree. Why else would they invest so much in video?
(Sam Divine, Jr. is a consultant, speaker, and author. He is CEO of Cross Atlantic Business Advisors, LLC and author of “BATTLEGROUNDS to BOARDROOMS: Life Lessons from The Liberian Civil War to Corporate America.” Sam previously worked in product management, advanced advertising and finance within the cable industry. Follow Sam at www.crossatlanticadvisors.com or www.twitter.com/samdivinejr )