The health of the cable television industry matters a lot to businesses. The overall modernization of the industry’s infrastructure during the past couple of decades, including its recent moves to embrace IP, has made it a player in business services. The industry historically has focused on small- and medium-sized business prospects. Increasingly, however, it is aiming at enterprises.
How much money cable operators put into commercial services platforms is determined within the context of its entire business. Multiple system operators (MSOs) have a lot from which to choose. In addition to commercial services, it can invest in its traditional entertainment video, emerging video, residential voice and smart home. Of course, a lot of the infrastructure is shared. But how aggressively the industry courts one or the other segment is to a great extent functions of its overall progress and the particular MSO’s vision.
On the other hand, it also is vital to understand that subscription-based video services still is the industry’s bread and butter. It pays the bills and, to a great extent, the health of this business is the most important variable.
It’s been a tricky time for the industry’s core video services. It is unrealistic to expect that its subscriber ranks would be stable as the YouTubes, Hulus and other “over-the-top” services that use cable, telco and satellite infrastructure for delivery came on line.
The good news, at least to this point, is that the losses don’t seem overwhelming. This MIT Technology Review story suggests cable subscription rates are slipping, but not drastically. The story features Roku, a company that helps people watch Web video on their televisions:
As the Roku figures suggest, cord-cutting is happening, so far, on a relatively small scale. For example, Nielsen reported that the number of households that have only broadband Internet and free broadcast channels increased by 631,000 in 2011. Meanwhile, 1.5 million homes ended TV service from cable, satellite, or telecommunications providers that same year.
In other words, the massive wave of migration is not materializing as fast as many Internet companies might hope, or as fast as cable companies and networks may fear.
Two recent commentaries — one at Engadget and one at Wired (by Brad Hill, the vice president of audience development at AOL) — acknowledge that OTT is a work in progress. But they point to the advantages of the nascent model and make the case for moving to IP-based a la carte delivery. The basics are that cable subscription rates are high and move only in one direction (upward) and that the OTT services finally provide a way around the problem that has bugged cable detractors for decades: Why should people pay for programming channels — especially the high-priced ones, such as ESPN — that they don’t watch? Writes Hill:
The cable cord-cutting movement is not yet a rampage, but it is a trend, and it is growing like irrepressible shoots of grass.
The bottom line of all this is a good one for the cable industry. It is inevitable that the introduction of a major delivery method — broadband — would eat into its subscriber base. However, the simplicity of the cable subscription, despite its expense, means that it will be favored by a vast majority of people who, simply put, have too many other things to worry about than understanding how to find the programming they want and get it to their televisions. The real threat will come if the OTT players manage to put together packages that are as user-friendly as cable’s. That day surely is coming. But, until then, the losses the industry has incurred easily are made up for by voice and other service offerings.
What does all this mean for businesses considering cable for their communications needs? It is quite possible that the industry is healthier than ever due to the diversification of its portfolio. That suggests that upgrades and innovation won’t stop and, if anything, make cable a better bet for business users.