Thursday, September 16, 2010

Cable Losing Shares

The story may be about Time Warner Cable announcing a loss of subscribers in the third quarter, but once the other cable companies announce their numbers, Time Warner will not be alone. But it is the second line in the NY Post story that really made me chuckle, "Poor home sales and the weak economy, which have families pinching pennies, are seen as the culprits." Perhaps there are other reasons at play too!

The cost of cable has risen faster than the inflation rate. Internet connections, whether tethered or wireless, are more valuable to the home than the cable subscription. And customers are tired of paying for more but essentially getting the same content. Customers are tired of exorbitant cable bills. My own relative recently informed me that their family recently cut the cord. A digital antennae, a broadband connection, and a Netflix subscription, and they estimate a savings of over $500/year. Sure, they are watching their pennies, but they are not doing without. They are getting all the content they want and need through alternative sources. It is competition through technology that is hurting the cable distributor. Yes price is a factor; but choice, convenience and ease of use are working against cable too. Technology is building a better user experience to compete with the cable model and at a lower price.

How will cable respond. Unfortunately, broadband pricing will begin to rise, again most likely faster than inflation. Heavier users will be penalized with additional fees. And cable will try to offset the loss of cable subs through higher pricing to their broadband subs. A wrong strategic move. The barriers to entry in wireless appear lower than cable. New competitors will rise and offer blanket coverage in your community and across the US. Content will continue to fill the IP platform and the consumer shift away from a tethered world will only grow.

The signs are there, Time Warner and the other cable companies. Stop blaming the economy and start changing your strategy to adapt to a changing entertainment landscape. Else your leadership position will fall.

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