Back in the dark ages of 2010, the biggest outside industry challenges facing the top cable MSOs included net neutrality, bandwidth availability, Internet TV, Wi-Max and the streaming services. Just three years later, some of the previous challenges have seemed to fade and some new, very potent challenges threaten the cable MSO fiefdoms.
At stake is the cable subscriber base. Without a substantial mindset change, the subscriber base will convert to other services that can meet their needs. The real question is at what point in time will subscriber frustration be irreversible and they all become The Walking Dead?
Taking a quick look back at the previous challenges that were outlined in the article titled Introduction to the Cable MSO Industry, we identified the following as the major concerns facing cable MSOs:
Industry Challenges from 2010 and What Happened
- Cable management silos: this represented the fact that cable business structure had the different products and services all being handled as separate business units with very little collaboration. This is still a concern.
- Net neutrality: This was the fear that cable MSOs will control what internet users see or do and steer them to costlier services by restricting access. It is still an issue today but has faded to a degree.
- Bandwidth: Concerns about bandwidth had cable MSOs starting to charge for fees based on usage. Although bandwidth availability is no longer a major concern, many MSOs and telecoms have started charging based on usage.
- Wi-Max: Wi-Max development has enables the use of more portable devices and is now integrated in many cable MSOofferings.
- Cable MSO Ownership: There was an anticipated consolidation of players which does not seem to have happened. Instead cable MSOs looked to add to their content channels such as the purchase of NBC by Comcast.
- Internet TV: In 2010 the concern was the availability and control of quality content that could be downloaded to a computer or handheld device. The original concerns posed by Apple TV and Google TV have not materialized BUT the concern has blossomed thanks to alternative TV and content options (see below).
- Digital Devices: It was anticipated that there would be an explosion of digital devices capable of accepting streaming content that would change the way that cable MSOs offered their products. This has happened and has grown to be the number one challenge (see below).
The cool part about the cable industry is technology is forcing change at an ever increasing rate. Some of the change was expected but other changes that need to occur may very well decide which MSOs survive and the future of the cable industry as a whole.
The Current Challenges for the Cable Industry
Perhaps the biggest change for the cable industry is the advancement of technology. For 30 years cable remained relatively stable as cable MSOs struggled to first gain acceptance, develop infrastructure, increase market share and finally reap the rewards. Although all of this is normal, the last few years have seen an explosion in technology that is having a significant impact.
Also normal is when an industry has high profits, the door opens for competitors with a technology edge to find market niches. If left unchecked, the niches can disrupt or even replace the existing industry icons. On the grand scheme of things this is the most important challenge for the cable industry today.
Looking at the maturity of the industry, the advancement of technology and the high profit potential, cable executives have to adjust their thinking before they find themselves obsolete. Putting everything together, the following is list of the new challenges facing the cable industry today:
2013 Industry Challenges
- Subscribers Satisfaction: Subscribers are not happy and are leaving in record numbers. Cable executives should be adjusting their view of subscriber needs to recognize:
- Subscribers are by and large not happy with higher than Cost of Living (COL) price increases, nickel and dime charges like modem fees and forced bundled content charges.
- Cord cutting is real as is the newer trend of households foregoing TV altogether. Part of this is cost but a larger part is that now there are more alternatives to broadcast/cable TV.
- Today’s consumer is more flexible with their time, and not conditioned to watch prime time broadcasting during prime time.
- The Internet is more important than TV for news, entertainment and socialization.
- Subscribers want content delivered their way (their device of choice and on demand).
- Cable Management Silos; As in 2010, cable executives need to break down the product silos to increase flexibility and be competitive with the newer leaner entrants. Newer competitors such as Netflix have already forged a permanent share of the subscriber market.
- Less Government Protection/Regulation: The industry can no longer rely on government regulation/courts to prevent competitors such as Aereo or Boxee from gaining a foothold. MSOs need to develop (or acquire) similar products that can be integrated into product offerings.
- Increasing Technology Insight: The world is in an information revolution which has brought innovators together from around the world to create new technology at an ever increasing rate. Because of this:
- Cable MSOs have to be more plugged-in to today’s consumer needs and global technology breakthroughs. If they are in touch with both they can pounce on these new technologies and generate revenue with high margins.
- Instead of trying to insulate themselves from new cable technologies, MSOs should look for ways to create revenue using new innovations.
Clearly, cable executives have an opportunity to do a better job recognizing the needs of consumers. The first and most important law of business is either offer customers what they are willing to purchase or lose to a company that will give them what they want.
With all this being said, the outlook for the cable industry is far from dismal. Cable MSOs greatest advantage is their years of profitability. They can outresource any competitor or potential competitor if they desire to and they can start a new phase of acquisitions for the technology they need.
If all this can happen in just three short years, what will the next three years bring? Share with us your perspective on Cable’s future.