Media Business Strategies

The Blog of David Polakoff

Cable Knit

Posted by David Polakoff on February 1, 2010

The Windmills of My Immediate Mind

Media Business Strategies – David Polakoff

Cable Knit

In the Time Warner Cable carriage renewal issue with Fox, and that of Cablevision and Food Network/HGTV, I was rooting for…the cable companies.  Before you attempt to string me up with coaxial cable, this is not meant to disparage the value of Fox and Food Network/HGTV programming (nor is it to celebrate exceptional cable service), but it regards the elasticity of my entertainment/information budget.  The creation and delivery of quality content has a cost, but there will be limits on consumers’ willingness and ability to pay.  Consumer behavior and business models are going to adapt – the point of equilibrium is the question.

Technology has enhanced choices for entertainment/news while making the access more convenient and less costly to the consumer.  Consumer behavior is in transition.  Games are available on mobile devices, computers, and on television sets via dedicated game devices – for a cost.  Books, magazines, and newspapers are available on mobile readers, in print, and on computers – for a cost.  Voice conversation occurs on landlines, via computers, and mobile devices – for a cost.  Television shows and movies can be accessed on mobile devices, via cable/satellite, on computers, and via game boxes, via the US mail, and in theatres – for a cost.  Music can be accessed via computers, via automobiles, mobile devices, and via cable through a television set – for a cost.  Even if companies achieve the pay-one-price for universal means access, consumers’ behavior will continue to evolve.  The evolution will accelerate with continued mass device adoption and the disappearance of the legacy means consumer.

In the transition, media companies should hope that consumers don’t calculate their monthly spend on books, newspapers, magazines, ring tones, wallpaper, cable television, home/theatre movies, mobile/land/VoIP phone services, games, physically recorded/internet/broadcast/satellite purchased music, virtual gifts, and concert attendance because such an exercise is going to drive a quicker consolidation of entertainment/news consumption – not in hours, but in household spending.

With increased cable channels and enhanced program offerings, cable company bills have been annually rising faster than the consumer price index.  Now, consumers are demanding alternative access to broadcast and cable channel provided content, as they please.  The cable companies are working to assure they don’t lose when consumers change the means of where their entertainment/news dollars are to be spent.  While the cable companies have added services (internet access; digital video recording; telephony; video-on-demand) to enhance their indispensability, they realize that increased consumer options, potentially at lower prices and added convenience, may challenge their legacy business models.  The cable company competition is not only from satellite and telephone providers, but from television manufacturers, Apple, Amazon, Barnes & Noble, Boxee, Netflix, Microsoft, Nintendo, Sony, etc.  My cheering for the cable company was purely to support any effort which highlights the fact that consumer spending on entertainment/news is not limitless – content/delivery providers should pay heed.

I’m absolutely willing to pay content delivery devices; to withstand advertising/sponsorship to underwrite the cost of entertainment/news delivery; and to pay for content – these tenets have always been true.  The mix, though, is going to change, and my behavior will be changing with it; cost will become more of a factor than before.

Everyone has seen the storm that first hit the music business; and the new storm hitting the print business. These genres haven’t died; they’re in metamorphosis.  It behooves the legacy media companies to be more creative, more proactive, and more risk averse in adapting their businesses.  What seems slowest to change is the cost structure in delivering content.  User-generated content is a new form of entertainment/news that will dwarf professionally produced content, but UGC has shown that eye catching content can be produced for less.  While not a universal proclamation, content providers will have to adapt their business models to continue to thrive in the new equilibrium; that appears the equation component slowest to acquiesce to the new order.

As a provider of financial, operational, and strategic services to media companies, I advise my clients to always follow the consumer and to be dexterous in satisfying the core audience – that means the content/service being provided, the cost structure, and the pricing.  Too many companies stray from this basic business philosophy.

I spend more time than ever before in my daily consumption of entertainment/news content.  To restore balance in my life, I’m going to seek a more discretionary attitude in time spent, content consumed, and dollars budgeted.  I used to wear cable knit sweaters, but style, preference, and use of my wardrobe budget changed; deliverers and producers of content beware.

One Response to “Cable Knit”

  1. Ronald England said

    Great article. I could not agree more!

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