Cable TV Transformation

A business model that is in the midst of a changing cycle is how cable television is being delivered to the consumer. If we look back approximately 15 years, cable was a very basic service where we would channel surf to find programming often with a help of a paper TV Guide from a magazine or the daily newspaper. As we moved through the late 1990s to the 2000s we saw the development of the TV Guide that was embedded in the TV so that no paper version was needed. Followed by the ability to record TV on a DVR box paired with a plethora of on demand options that made managing your TV watching easier by adjusting the programs you wanted to see to your schedule, without necessarily planning your day around a specific show or event that you want to see. The only television I can think of that we still have to adjust our schedules for nowadays are live sporting events.

The on demand model has also made corpses out of formerly successful businesses such as Blockbuster Video or Hollywood Video. In addition to on-demand, businesses like Netflix also filled the void in traditional video rental by using the mail system and less restrictive late return policies to rent movies, and most recently a mail-less version where Netflix movies can be accessed via an on-demand style internet connection via an X-box or a like device.

As the next highly anticipated invention that we will see is the Apple TV. It is widely looked at something that will change the cable TV industry all together much like the Iphone changed the hand-held personal device sector and the Ipad changed the personal computer space. The Apple TV is being hyped up to be the future of media and entertainment technology. Although officially Apple is being its usual self when it comes to the secrecy of its new product, but rumors are that the Apple TV is above all trying to be as easy to use for the consumer as possible by eliminating wires, connections, and having everything be in a centralized singular platform, much like the I-Macs that come with no additional computer towers or wires that connect to third party equipment like printers, scanners, etc. that have to be connected to the monitor. Even the remote functions are said to be performed by apps within the Iphone/Ipad so that there are no separate remote pieces that come with current TVs and Cable systems.

The issue I see that will provide headwinds for the development of the new entertainment model, is that Comcast, Fios, and other cable providers will not stand idly by and have their revenues be destroyed by the Itunes store and similar setups where content can be provided by the manufacturer. The cable companies are already having issues with charging advertisers high level of fees, especially when an increasing amount of people are recording shows and fast-forwarding through the commercials at an increasing rate.

There was a CBS money watch article today that described a few of the roadblocks to modernizing the cable industry, primarily the fact that the majority of cable users are well embedded with the current model and due to the anticipated high switching costs to an apple TV and having a variable cost bill due to on-demand charges rather than a fixed bill that most consumers are currently subject to. Should be an interesting next few years in the television industry with regards to the transformation of the cable sector and the roles that the different companies play in bringing the end product to the consumer.