Thursday, November 18, 2010
This was an unexpected story that I ran across this morning in the Financial Times.
Cable television - which only a few years ago was being touted as a "growth story" and Comcast CEO Brian Roberts was the talk of the financial world - suffered its largest decline in 30 years in the third quarter. What seems to be happening is either younger viewers are watching TV on their computers, or economic stress is causing subscribers to stop their cable service.
For whatever reason, this could be a major transformation in the entertainment world.
Here's an excerpt from the FT's story:
The number of people subscribing to US cable television has suffered its largest decline in 30 years as younger, tech-savvy viewers lead an exodus to web-based operations, such as Hulu and Netflix.
The total number of subscribers to TV services provided by cable, satellite and telco operators fell by 119,000 in the third quarter, compared with a gain of 346,000 in the third quarter of 2009, according to SNL Kagan, a research company.
Although TV services offered by telecoms and satellite providers added subscribers over the period, cable operators were hit hard, with subscriber numbers falling by 741,000
FT.com / Media - Viewers pull plug on US cable television
This is not to trash Comcast or any other cable company (although, truth be told, I can't tell you the number of times that I have cursed Comcast's internet service, which always seems to crash when I need to get on the web) but rather to point out what former General Electric CEO Jack Welch described as "the law of unintended consequences".
It is obvious to everyone that the internet has transformed most aspects of our everyday life - this was anticipated for many years. However, what most seemed to get wrong is who the ultimate winners and losers in the internet world would be.
Telcos and cable companies are suffering greatly. I would argue, for example, that AT&T and Verizon are heading towards the same fate as GM and Ford were years ago. That is, they suffer from huge infrastructure costs, large legacy pension and health care burdens, and declining revenues from the only profitable parts of their business (landline phone service). To me, both cable and telco are unattractive investments.
What about media?