There’s a new star in town, and many are going to great lengths to get an introduction. Kids are in awe of this star’s brilliance; adults are speechless. The excitement seems palpable.
Meanwhile, a small group wonders why everyone is making such a fuss. This group sees an aging, expensive, and less attractive star whose best days are over. They prefer one who is younger and more attractive.
If you are a sports fan, this should sound familiar because it happens all the time. If you live in Denver or Indianapolis you may instantly recall the recent Peyton Manning saga. However, the star I refer to in the example above is the ever-evolving video product. Cable operators wonder if data will be the luck of the future. The pundits argue about when video, long considered the anchor product, might be cut. After all, it has the lowest margins in the bundle and costs are increasing at rates that price increases cannot match.
Despite its faults, there appears to be no shortage of lusting video admirers. They include everyone from the young rebels of over-the-top (OTT) fame to mature mavens like Intel with billions on their balance sheets. Along for the ride are tweens somewhere in the middle. (Click on chart below to enlarge.)
Why are so many companies interested in a product with declining subscribers and lower margins? Intel is the latest, following Apple, Google, and Microsoft who all consider this space worthy of some involvement. Each company may have different motivations. Yet it is fair to assume they see an opportunity to make money. I believe video attracts competitors for at least three reasons.
First, video customers believe they overpay for services they do not use. (In my last column, I argued that operators help this by framing their marketing around price.) Customers believe they receive poor service and even larger bills for their loyalty. This state of agitated customers is appealing to competitors.
The second reason is simple: people love entertainment and video is a powerful and engaging form of entertainment. With multiple devices over which to watch and make video, interest will continue for a long time. As social TV continues to evolve the interest will only deepen. Eventually, the TV itself will evolve as consumers move from wanting TV on their tablets to needing the television to be a tablet on the wall.
Unchanged Business Model
Consider the business model changes experienced by other media in the last fifteen years. Radio, newspapers and music have all seen their business models evolve significantly. Remember when we had to buy full CDs? By those standards, the video business model appears up for reimagining.
Predicting the future of video is difficult. Arguably, the incumbents may know more about their aging star than anyone else. Maybe everyone should listen to them and hope for luck. However, some of the admirers are experienced in reimagining entertainment business models amid customer pricing angst. Perhaps they will be right about betting on this aging star. It is hard to know who is right. Only time will give us the answer.
(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. Follow Sam at www.crossatlanticadvisors.com or www.twitter.com/samdivinejr)