Investors and customers are wrestling with the dilemma faced by the cable television industry. Cable TV is struggling on two fronts, television and broadband. This is a long-term trend that has escalated over the past decade. So, let’s take a closer look at the causes of the problems and the potential solutions.
To start, it is important to understand the growth wave. The growth wave rises, then it crests and then it falls. Companies, products and services need to be on the rising side of this growth-curve.
Crossing over and being on the downward side is not where you want to be. That is what is happening to the world of cable TV and broadband. New technology, new competitors and bad moves over the long run are the culprits.
In fact, this problem has been exasperated by the industry itself. Instead of finding a long-term solution, it has just put bandages on the cuts. The moves made to slow customer losses a decade ago are part of the problem today. Is there a solution? Perhaps.
Cable TV viewership continues to decline
First, the facts. Broadcast TV and cable TV viewership keeps declining. In the past year alone, broadcast viewership dropped 5.4% and cable TV fell 12.5%. Nielsen, which follows television usage, says both broadcast and cable television have hit a record low of 49.6% combined viewership.
This slump has happened over time: Consider the telephone line we all had, but which has been rapidly declining and giving way to wireless over the past few decades.
It’s worse for some cable television companies. Some smaller competitors are down to 10% of their previous activity. They have begun to announce they are leaving cable TV. Others will follow.
The larger competitors are doing slightly better. Depending on the geographic location, larger cable companies are down to 30% or 40%.
Customers are moving to countless streaming services like Netflix NFLX – $474.67 4.41 (0.938%), YouTube GOOG – $138.04 2.32 (1.653%) and more, which continue to grow, already hitting a record high of 38.7% of total television viewing.
Cable TV broadband is threatened by satellite and FWA
Another big threat to cable TV companies is their own broadband business. You may not realize this, but the primary service of the cable TV industry today is broadband. It is no longer cable TV.
Cable TV broadband faces new technology and new competitors like Starlink satellite broadband from Elon Musk, and Amazon’s AMZN – $144.6 3.82 (2.574%)
rapidly growing satellite tech. And they are taking business away from the cable TV industry.
The third threat is fixed wireless access (FWA). This is a wireless broadband technology. FWA 5G wireless broadband comes from wireless carriers like AT&T Mobility , T-Mobile TMUS – $162.3 0.22 (0.136%) and Verizon Wireless VZ – $39.37 0.21 (0.536%). This can also come from smaller wireless carriers like US Cellular USM – $41.16 0.65 (1.605%), C-Spire and many others.
So, cable TV is under intense and increasing pressure, in the crosshairs of new technology and new competitors threatening key businesses like television and broadband. Customers are leaving. They are moving to streaming services for entertainment and FWA and satellite for broadband.
How cable TV hurt itself
The constant manipulation by cable TV companies of what their customers pay may have made investors happy in the short-term with extra profits, but it also made customers increasingly unhappy in the long-term.
As an example, customers choose a package of cable TV and Internet. Then the cable TV companies change the playing field. They’d move certain channels to different packages. So, for the customer to get what they had, they now have to buy several packages, which increases what they pay.
High prices alone are not the real problem. Apple AAPL – $181.91 2.34 (1.27%) is a high-priced competitor, but they offer an excellent product and they don’t make changes to trick their customers into paying more every year.
And cable TV never learned that keeping customers satisfied is the key. While cable TV companies have been more polite lately trying to win customers over, their actions continually cost customers more money every year.
Customers have finally understood this and that is the biggest threat of all. In fact, this problem has been going on for longer than most can remember. That’s one reason cable TV ranks among the lowest in customer satisfaction.
That being said, the problem is not the sole fault of the cable TV service providers. This is a sign of a broken industry structure. It’s a multipart structure. There are countless creators, channels or networks, cable television companies and end users.
If the customers complain about the high price they pay to the cable TV company, the real culprits never hear about it. So, it never gets corrected. And the problems continue to grow.
So, is there a solution?
The broadband threat from the satellite and wireless providers may be the quickest and easiest to solve. Why can’t the cable TV competitors get into this space? Cable TV faces fierce competition, so it must offer a good quality, reliable, fast wireless broadband experience at a competitive price.
This will of course eat into the profitability of the cable TV industry. However, it’s better to lose some then lose all. And that is the choice it has today. They can dig in and innovate, develop new services to sell to the customers who want it. That solution makes sense.
As for the loss of cable TV service, that’s an expensive and broken industry as we have discussed earlier. With fierce competition from big time players, it may be too late to save.
However, if cable TV can just hang onto their broadband market share using FWA 5G wireless broadband services, they may be able to reinvent, transform and survive. It won’t be easy because these new competitors do not take prisoners. That means the battle will continue to be fierce. However, this may be the best option for the cable television industry. Equities