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Cable Technology Feature Article

March 24, 2009

Cable Opportunity Amid Recession

By Erik Linask, Group Editorial Director

Regardless of which cable operator you get your service from, history shows there is a reasonable chance you have a complaint or two. If nothing else, costs have been surging upward for years, with little additional programming from providers like Cablevision. Why don’t they offer the networked DVR solutions available from companies like Cisco? If you’re a sports fan, you likely also turn red every time you see an ad for DirecTV (News - Alert) advertising its exclusive NFL Sunday Ticket package; or you wonder what happened to the programming that kept your kids tamed while you get ready for work in the morning.
But, with their ability to offer packaged deals — at least for the 12 months of service (after that you can go right back to complaining about price) — cablecos have shown a certain resiliency in being able to provide triple play services that competing telcos often struggle with. 
Take AT&T (News - Alert) and it’s U-verse alternative, for instance. While on the surface, it may appear comparable to Verizon’s FiOS — and it may be, if you live alone or with just a spouse, and live around the corner from on of AT&T’s boxes. Otherwise, you may be in for an unpleasant surprise when you try to have them connect four TVs a half-mile away from the nearest box. The one thing I can say for my cable service is that it’s been reliable, barring power outages over which the provider has no control. 
I’ve heard more than a few people talk about switching to Verizon (News - Alert), AT&T, or other alternatives, but recent research put out by CTAM (the Cable and Telecommunications Association for Marketing) suggests this may be an optimal time for cablecos to strengthen their relationship with customers.
Consumers are cutting discretionary spending to weather the recession, but a January survey conducted by Centris found that 81 percent of cable households plan to retain their current services — up from 71 percent only two months prior. In addition, 95 percent of cable modem owners say they plan on keeping those services. Likely, some of the difference will see some households move to satellite video providers or IPTV (News - Alert), but in the current economic environment, stability is a welcome trend, and the number of cable-keepers is likely to grow again.
This trend is being largely driven by cuts in spending on other activities, as impulse buys, dining out, shopping, entertainment (i.e., movies, concerts), vacations, and even dry cleaning are largely being cut. On the other hand, brand loyalty is growing, with 37 percent of respondents saying they are not likely to try new brands. That trend likely carries over into the cable realm as well.
“These are uncertain times, and consumers are not only cutting back on out-of-home activities, they’re cocooning with family and friends in their homes,” said Char Beales, CTAM President and CEO. “This has led to increased reliance on cable’s valuable entertainment, information, and communications services.”
Indeed, as the economy continues to struggle, subscribers are using their services more, including TV and Internet services, and are becoming more familiar with their providers, which helps build loyalty (assuming reliable service, of course).
Thus, given what we know of consumers’ thoughts on cable providers and other alternatives, the economy has created a prefect storm for cablecos that they would be wise to leverage. As long as subscribers present a captive audience — which the economy has created — the timing is perfect for the introduction of new services and products that can help ensure loyalty once the recession subsides. There are plenty of alternatives, including a growing IPTV provider base, which cablecos need to ward off. And if telcos like AT&T can get their act together, they present another viable competitor. Once the economy recovers, subscriber loyalty will almost certainly become as fickle as ever.

Erik Linask (News - Alert) is Group Managing Editor of TMCnet, which brings news and compelling feature articles, podcasts, and videos to nearly 3,000,000 visitors each month. To see more of his articles, please visit his columnist page.

Edited by Erik Linask