The earth is shaking under the feet of the cable television industry. Traditional cable TV is facing an earthquake that is changing the entire industry. When the dust clears, everything about the traditional industry will be very different. A new television industry is emerging. Can Cable TV survive?
This has been building for years, but all of a sudden new technology with the Internet, new ideas and new competition, have all reached the point where they are now starting to negatively impact the cable television industry.
We’ve been complaining about cable TV forever. However, even with all that noise about poor service and rising prices, the cable television industry continued to grow. Why? No competition. Customers had not choice.
Today things are changing. Competition is finally starting to impact the industry. In this new marketplace, since the cable television industry has treated customers badly over time, they are at risk.
So now competition is finally starting to take away cable television’s exclusive marketplace position. Cable TV is losing market share and competitors are growing.
So what does this mean for customers and investors?
Take a look at cable television companies like Comcast ($CMCSA), Time Warner Cable ($TWC) and Cox and you can see the pressure they are facing.
The cable television companies should not have been taunting customers over the years. They should not have been fighting users desire for “a la carte” services. If they gave customers what customers wanted, their current predicament would not be as bad.
However the industry turned a deaf ear. Now they are beginning to face the wrath they have created. They can pull up before they crash, but there is no sign of that so far.
The average user watches five to 10 channels, but has to pay for hundreds. This is one area where cable TV really screwed up. A la Carte let’s users choose the channels they want to watch and pay for only those. This idea has always been pushed back by the industry.
Because they didn’t give customers what they wanted, the cable television industry has started to lose customers. This will continue as far as I can see unless the industry does an about face.
There has been so much change over the last decade that has really started to eat into Cable TV’s dominance. Let’s take a look.
- It started with satellite TV from companies like DISH Networks ($DISH) and DirecTV ($DTV).
- Then the large telephone companies jumped in with their IPTV services. This was the first type of service that used the new technology and the Internet to provide a better television experience. These are services like AT&T Uverse ($T), Verizon FiOS ($VZ) and CenturyLink Prism ($CTL).
How is IPTV doing? A year ago AT&T gave an example in an analyst meeting that they have won more than 50 percent market share in Dallas to make their point. That’s incredible performance. I can’t wait for an update.
This shows how cable television has shot itself in the foot. It shows how much resentment customers have developed because of the industries attitude toward them. It shows how they want something new. And more change is coming.
- AT&T is in the process of acquiring DirecTV.
- Verizon says they will launch a WebTV product next year.
- Last week HBO said they would launch their first web based television offering letting non cable TV customers watch for the first time.
- Last week CBS ($CBS) also announced it will let viewers watch their programming on the web without a cable TV subscription.
And this is just the beginning. We are just in the first inning of this revolution, which is transforming the industry. So as you can see everything surrounding the television business is being reinvented. And all this change suddenly seems to be on the fast lane.
What will the cable television industry look like going forward?
- I see traditional cable TV continuing to lose. It will stick around for a long time, but it will not be a growth business. Unless and until they are willing to cannibalize themselves in order to win long term. So far I see no sign of that happening.
- I see competitors to traditional cable TV continuing to grow. That means telephone companies like AT&T, Verizon and CenturyLink, as well as newer companies like Netflix and Amazon.com.
- I see new technology and the Internet continuing to change the world as we know it. Who would have imagined ten years ago that companies like Netflix ($NFLX), HULU, Amazon.com ($AMZN) and others would be transforming cable television? Yet they are.
- I also see the wireless industry playing a growing role in this growing and changing space. Companies like AT&T Mobility, Verizon Wireless and Sprint ($S) are going to let us watch television wherever we are on our smartphones, tablet computers and smart watches.
The world of cable TV is changing. We used to rush home to watch our favorite program at a certain time. Tomorrow we will be able to watch whatever we want, whenever we want, on what ever device we want, wherever we are.
We are turning the world of traditional television on its head.
Cable TV does not have to lose like they currently are. They can lead the way with innovation. However they have to be willing to do what other market leaders do on a regular basis. They must cannibalize themselves and reinvent themselves for the future.
Will cable TV cannibalize itself in order to win going forward? Will they cut off their arm in order to continue to live and grow? That is the question. I see no sign of this yet.
I don’t see them vanishing short term, but I don’t see them growing as rapidly either with all these new technologies and companies offering innovation.
The future of the cable television industry is at stake. Everything is changing. There is no time to waste. Whether the industry succeeds or fails is ultimately up to the industry itself. What we will do next is the question.
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