In today’s fast-paced media businesses, old paradigms may no longer be valid. Consumer behaviors are changing as technology gives them more and different options in how they receive various types of information, content and communication. Cable companies are increasingly challenged to keep pace with the changing environment to remain viable.
The cable industry has weathered many similar challenges in its relatively short life-span, and most were initiated by changes in technology. The industry has succeeded through its willingness to embrace new technologies and take huge risks in so doing. Equally important has been the industry’s ability to invent new business models to generate new revenue streams, just as the older models were becoming mature. The critical success factors have included speed of technology adoption and quick learning, access to capital needed for technology deployment and streamlined operations – along with serendipity and great timing.
In its early days, cable succeeded by outflanking channel constrained broadcast TV industry to become the sole source of unique narrowcast programming formats. Then satellite TV began to directly compete with cable, offering the same programming options. However, before this caused cable profits to spiral downward, the companies spent billions of dollars to upgrade the technology. The upgrade allowed cable to offer fast Internet access and digital phone – new businesses that few knew anything about. Once again, cable was first to market and played a leadership role in defining how the new service was packaged and priced. The telcos followed cable with TV and Internet services based on what many argue was inferior technology. Cable’s Internet and voice businesses provided new revenue streams that more than made up for the losses attributable to the inroads of satellite TV. Even as these new opportunities were being exploited, cable did not neglect the core video business. Innovations that included Digital TV, HDTV, On Demand and the DVR added new dimensions to customers’ TV viewing and kept the industry competitive.
So has cable been a perfect business? With a broadband pipeline going into consumers’ homes, cable has the technology and infrastructure to support video content viewing on two key platforms: on the TV set and over the Internet. Now, will cable’s inherent strengths of the broadband connection and experience with new product deployments be leveraged to create tangible benefits for every consumer in the world of Internet TV? What can cable offer that over-the-top providers cannot? Will cable continue to redefine itself in ways that are meaningfully different and better than its competitors?
So far, the industry has succeeded due to its engineering prowess, financial savvy and the ability to take risks. Additionally, increased sophistication in customer communications and brand positioning, along with consistent messaging of the superior benefits of its products and services, will remain critical. There are new vulnerabilities and opportunities in the video business. Although not yet widely adopted, the ability for viewers to easily access video content over the Internet and watch it on multiple devices, including the TV set, is seen as an alluring alternative to cable. Cable’s success in this arena will greatly depend – once again – on a deep understanding of what’s driving the consumer, then maximizing technological advantages and adding a new delivery platform. Will over-the-top provide more economical viewing choices to the consumer? Why are customers attracted by it? Will programmers improve their revenue streams by partnering with non-cable providers of over-the-top TV? Will customers cut the cable cord? The industry must now work to answer all these questions.
As in the past, consumer research will play a strong role in guiding both cable companies and content providers to successfully manage this huge opportunity and to build new businesses. To that end, CTAM’s latest co-op study, Life is a Stream, examined the viewing behaviors and preferences of consumers who stream or download TV shows and movies from the Internet to the TV set.
Contrary to popular belief, results showed that, rather than cord cutters, these consumers are “cord keepers,” who highly value their pay TV service. Major findings include:
· 92 percent of these entertainment enthusiasts subscribe to a pay TV service;
· 84 percent of these viewers report that they are watching the same, or more, regularly scheduled TV since they started streaming or downloading programs or movies to watch on the TV set; and
· Nearly two-thirds say that the channels they get from their pay TV service are important to their overall entertainment experience.
Undoubtedly consumers have more options to access content where and when they want to than ever before, and there’s more to be understood in terms of how advances in technology might alter viewing behaviors in the future. It remains to be seen how successfully cable will respond and adapt. However, as recently as early January at the Consumer Electronics Show, we witnessed proof that the industry is embracing advances in technology and working to solve the challenges of providing consumers with alternative viewing options. In fact, they’re forging agreements that will enable the delivery of content through connected TVs, tablets and Smartphones to ensure their customers have the depth of content they desire and the mobility to fit their lifestyles. Consumers are watching… And we’ll see if cable can win again.
(Dr. Angelina Li is the principal at AHL Consulting, a premier market research and business strategy consultancy. Angelina’s website is www.ahlci.com).