It is less than surprising to hear that the cable industry is riddled with business issues. For once, Comcast, the largest cable company, burdens its customers with absurd cancellation policies, while the members of the industry are centralizing their efforts for all the wrong reasons.
In the end, Americans end up paying unbelievable fees for their monthly subscriptions to Internet services and TV packages and they receive in return mediocre quality.
Many other departments would have eventually been killed if faced with such intricate business problems, but not the American cable industry – at least not yet. They are set on one terrible practice: preserving an outdated business model.
Why fix something that isn’t broken?
One can easily see why the industry is holding onto their business by their teeth – the game has been very good to them so far. Even though more and more Internet-based fiber networks are starting to offer similar TV service, the cable giants still stand unopposed throughout the nation. Consequently, their income flow and insane profit margins keep them afloat – and then some.
The industry still has still got it – in 2014, 58 percent of Comcast’s consumer income was provided by TV services, still very close to the 60 percent reported in 2012. This means the TV business is here to stay for a while longer.
In spite of the growing number of fiber networks, most major cable companies have accomplished a significant growth in sales a lot faster than telecom companies AT&T and Verizon. Due to such encouraging reports, investors believe this business is still solid.
In contrast, Verizon and AT&T have been underachieving during the same three-year period, as each cable company, one after the other, continued to mention doubling gains.
It sounds like the TV business is doing just fine – until we start thinking of other examples of businesses that were overtaken by their more advanced counterparts. This model has been going on for a long time, way back to the buggy whip versus the first automobiles.
As soon as the new technology and Henry Ford’s innovations gained traction, buggy whips were quickly forgotten or, at best, downsized to a niche item for collectors.
Conquering the traditional model
For those who want a fresher example, there’s always Amazon.com and its new and improved low-cost online model in the bookstore business. Their traditional – bricks-and-mortar – counterpart is now more than eclipsed by the fantastic annual revenues reported by the online bookstore.
The year of 1993 marked the small beginning of Amazon, but it wasn’t long until its growth started taking over the business. However, not all of the more traditional book sellers got trampled along the way.
For example, Borders might have had to file for bankruptcy and close its stores, but there are giants such as Barnes & Noble and Books-A-Million, Inc. that are still holding their flags high.
The question remains: how could some bookstores survive the transfer to the online environment and others became food for worms? The answer is simple: they were not stuck in an obsolete business model and learned how to change with the times.
Barnes & Noble was smart enough to launch the Nook lineup and partner with tech giants that help the company be relevant. Books-a-million seized the niche of used bookseller, and marketed itself toward this line of business. They even started buying used books from customers. What did Borders do to embrace the future? Fairly nothing.
Comcast should watch and learn
It is rather obvious what the TV market should learn from this incursion in the recent past. Just as the online took over old-style bookstore, a digital revolution is already starting to meddle in the current TV business.
As long as Time Warner Cable and Comcast cling stubbornly to their old ways, they are on the path to oblivion. The new reality of simple Internet connections should be embraced and they should focus on learning how to become more relevant to what the customers demand.
It might sound like market suicide – going into a whole different direction and renouncing the fat profit margins – but it is a necessary, if drastic, step on the right path. TV titans would have to remap their vision for the future, and most are not ready for that just yet. They are way too attached to their monopoly-like market power and the thought of entering in a fair market with true competition scares them and will soon render them obsolete.
In the next ten years, a drastic change will be visible in the way Americans perceive TV cable companies versus Internet network providers. Maybe TV viewers are not yet switching from their time-worn cable systems by the millions, but the new era of digital entertainment services is slowly but surely conquering territory.
There are enough Americans that have cut the cord, and the trend is only going to become more prominent in years to come. The cable industry is bound to understand the battle is not worth fighting if they don’t make some changes – but that realization will dawn a little too late, after the epic crash of the business.
Image Source: US Magazine