The future has to involve 'TV everywhere'
Raymond Snoddy says there is one small worm in the bud when it comes to cable networks all over both Europe and the US; while revenues are holding up reasonably well - and even continuing to rise despite the recession - subscriber numbers are being hit... Almost everywhere competition to cable is becoming more intense!
Years ago the then chief executive of satellite broadcaster BskyB, Sam Chisholm, predicted that eventually cable would eat his lunch. Yet even though the cable industry had everything going for it, somehow it famously managed to pluck near defeat from the jaws of victory.
The cable companies suffered from fragmented franchises, incompatible systems, notoriously bad customer relations and standards of service and indecision over whether they wanted to be content owners as well as platform operators - or not.
Hardly surprising then that Sky managed to run rings round the cable industry.
Many of those ills have been put right by the last cable company standing, the UK's monopoly cable operator, Virgin Media.
Naturally Virgin would argue, and does, that it has been prevented from developing further by what it sees as the onerous terms of trade imposed by Sky. Yet Virgin's most recent results for the half-year to the end of June show just how much progress has been made.
Total revenues rose by nearly 4% and there is clear evidence of customers migrating up the broadband speed chain and being willing to pay for the extra speed and capacity. Around 50% of Virgin's broadband customers pay for speeds ranging from 30 to 100 Megabits - something satellite cannot manage. Indeed Virgin can now offer 100 Mb broadband to more than six million homes.
But there is one small worm in the bud and it is seen in cable networks all over both Europe and the US. While revenues are holding up reasonably well - and even continuing to rise despite the recession - subscriber numbers are being hit.
Almost everywhere competition to cable is becoming more intense.
Virgin didn't exactly trumpet the fact that they suffered net cable disconnections in the second quarter alone this year of 36,000. The company tried to sugar the pill a bit by arguing that most were "lower-value" single or double tier customers.
Never mind the numbers, look for the quality seems to be the line. It is a pattern replicated everywhere. Last year cable in Europe and the US started to see successive quarters of subscriber loss and it is a pattern that has continued.
The culprits range from increased competition from satellite and telecoms companies, to OTT (over the top) operators such as Hulu and Netflix who are offering cheaper TV and movie packages than the bundles of cable services.
And then there is the recession. Anyone who has lost their home in the US mortgage scandal is hardly likely to have a monthly cable package.
American cable companies are clearly hurting as long-term customers who still have their homes "cut the cable" in search of cheaper options.
Recent research by SNL Kagan suggests that 10% of US homes, or 12 million, will have got rid of their pay TV services by 2015. By the end of this year, 4% of homes (or 4.5m) will have torn up their cable or satellite deals.
In Europe, where the OTT services are not as strong as in the US, the main threat seems to be coming from recession as consumers decide what to spend their limited resources on. At the very least cable and satellite groups could increasingly come under threat from customers trading down and giving up premium channels.
The mantra of the industry has always been that we are immune from recession. We are the cheapest form of entertainment, much cheaper than going out to pubs or restaurants. While that is undoubtedly true, fear of redundancy and the general mood of economic gloom is causing consumers to review all spending.
Even in the UK there is the clearest possible evidence that Sky fears that its business is not totally immune from recession as previously thought. Why else would the satellite broadcaster decide this year for the first time in living memory NOT to put up its prices.
The letter from Sky informing customers of an "adjustment" in prices was always the first sign that autumn was on the way. You can be sure the announcement this time was not an early Christmas present. Sky must have been really worried about cancelled subscriptions.
So what, if anything, can be done? At the CTAM cable conference in Malta at the weekend two senior speakers from suppliers to the cable industry, Michelle Novak - global head of strategy and solutions for cable, broadband and satellite for Convergys - and Phillis Harris - Microsoft's worldwide general manager for communications and media - had firm views. The cable industry was at a crossroads and risked a gradual decline in the face of many new competitors unless action was taken soon.
Of course the two executives had a vested interest and were trying to sell the cable industry new, more sophisticated customer management services and all the latest software gizmos. While allowing for that vested interest a vision of what the cable industry could become emerged from the session.
Cable will have to go beyond "triple" and "quad" play - TV, broadband, telecoms and mobile and offer a wider range of services in the home - everything from security to smart energy monitoring. The executives argued, and they are scarcely alone, that the future has to involve "TV everywhere".
Cable will not be able to rely in future on just the cable into the home. Going mobile, however, raises issues of "user authentication". Give someone a code and they can pass it on to others for freebies all round. Work is already on the way on developing voice recognition systems as a way of protecting access to subscription services.
The future also has to involve opening up more personalised services for individual customers - something that should increase subscriber loyalty - an identity rather than an account, as Convergys puts it.
Maybe if the cable industry manages to continue to migrate up the value chain old Sam Chisholm could be proved right after all.
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