How Challenges Have Forged a Stronger, Kinder Cable Industry
They say that what doesn’t kill you makes you stronger, and that sentiment certainly applies to the cable industry. In an age when superheroes rule both big and small screens, it’s not a stretch to liken cable’s unsteady journey to that of a struggling hero besieged with challenges at every turn.
Cable providers, once hailed as the industry-leading champions of televised entertainment, frequently find themselves turned into unlikely villains. However, as with most heroes, the cable industry has come out of each challenge stronger, wiser, and more in-tune with the public it serves.
To understand the twists and turns that cable has faced — and how it has overcome them — it helps to take a closer look at the major developments that have disrupted this industry that once seemed untouchable.
Satellite Television: Cable’s First Real Challenger
Like Captain America, cable TV emerged on the scene in the 1940s as a marker of post-war prosperity and success. The ’50s saw unprecedented access to broadcast signals, and by 1962 there were around 850,000 households subscribing to cable across the nation — a number that jumped to 16 million by the late ’70s. It looked like cable’s steady march across the living rooms of America was unstoppable.
Then, in 1976, the invention of satellite television changed the entire pay-TV landscape. Although satellite broadcasting had existed as long as cable, it was slower to take off as a viable method of residential entertainment delivery. In its earliest form, satellite technology actually supplemented cable systems, delivering programming to the large dishes at cable broadcasting hubs.
The amiable partnership between the two technologies didn’t last long, however. As soon as the hardware necessary to receive satellite signals directly to the home became more affordable in the ’80s, consumers began making the switch. Since that split, satellite providers have given the cable industry a run for its money. Despite some regulatory setbacks, satellite TV has grown to more than 33 million subscribers from 1992 to now.
But the separation from satellite technology didn’t herald the end for cable — far from it. Instead, it challenged the cable industry to take a closer look at its offerings and pricing. Between 1996 and 2002, cable got to work upgrading its materials and capacity. The industry spent $65 billion to stay ahead, and gave birth to an early form of what we now know as “broadband.” These upgrades gave cable a leg up on the fledgling satellite industry, allowing cable companies to expand their offerings to include phone and Internet services.
Cable Mergers: A Power Too Great for This World
As soon as cable took off in the home entertainment, Internet, and even telephone markets, big companies turned an eye to acquisitions and mergers. The upside of alliances between powerful providers included big support and financial backing for expanding and upgrading infrastructure, not to mention bigger collective buying power for programming. Yet despite the substantial benefits, not all government agencies or consumers were as eager to support cable mergers.
Fearing what might happen if cable monopolies were given too much power, the Federal Communications Commission (FCC) stepped in to keep an eye on potential mergers and prevent actions the regulator viewed as disadvantageous to the American consumer — a move eerily similar to the “Sokovia Accords” in Marvel’s recent “Captain America: Civil War.” In recent years, the FCC’s oversight has aimed to provide the general population with protections against emerging issues like data caps, price hikes, and limited consumer choice.
Despite regulations, the cable industry still prospers. Even though some mergers have been blocked, Charter® Spectrum recently saw success in acquiring Time Warner Cable®. To help comply with the FCC’s rules, the merger promises to “ensure Charter’s current consumer-friendly and pro-broadband businesses practices,” according to Charter CEO Tom Rutledge.
Streaming Services: Cable’s Kryptonite?
Perhaps the most obvious foil to the cable industry has been the rise and expansion of over-the-top (OTT) streaming video services like Netflix®, Hulu®, and Amazon® Video. With screens leaving the sanctity of the living room and becoming mobile, American consumers have changed their TV-watching habits. Streaming is now preferred over traditional viewing.
This preference gave rise to the cord-cutter movement, resulting in cable subscribers migrating away from traditional pay-TV plans. That sounds like a death knell if there ever was one, but evidence indicates that the exodus may be more hype than anything else. While around 8% of cable subscribers have completely cut the cord, a much larger number — around 45% — are simply slimming down their subscriptions.
The real victors in this particular battle are the consumers. Cable has had to respond to the streaming trend, and it’s given rise to a whole new generation of streaming options for subscribers. XFINITY®, for example, recently launched a new streaming service that includes live episodes of top shows, On Demand viewing, and access to recorded shows — all for the paltry sum of just $15 per month for current XFINITY Internet subscribers. There’s no question that the battle between streaming services and cable subscriptions is far from over, but moves like this indicate that cable companies are willing to be flexible and innovative to stay relevant.
The Battle for the Box: The New Frontier for Cable Services
This year cable faces a challenge that originates within its own ranks: the cable box. Anyone who has subscribed to cable is familiar with the little, black set-top box that delivers and records content. Most people don’t give it a second thought, despite the monthly fee they pay for the privilege of having it in their home. The FCC, however, has not been as complacent.
In an effort to increase choice for consumers, the FCC recently proposed a motion to “unlock the box” and allow customers to purchase a cable box from any manufacturer they choose. Until this proposal came about, no one but cable companies manufactured cable boxes. Needless to say, both cable and programming providers balked at the proposal, citing privacy concerns and positing that the move is a step back for an industry becoming more reliant on apps and other technological developments.
The proposal passed in February, and even though the final rules are yet to be decided, this move by the FCC presents a big challenge to cable providers. Unease about reduced advertising revenue — which could lead to diminished programming options — is among the industry’s top concerns. However, if the past is any indicator, the cable industry should be able to overcome this threat as it has so many others.
Ultimately, these types of challenges push the status quo to evolve, passing on the benefits to pay-TV consumers. It may be painful at first, but as the history of cable’s major battles reveals, this entertainment champion is more than capable of adapting. Just as superheroes fight it out on screen and learn from their wins and losses, so has cable become stronger from the heat of battle. To learn more about current cable challenges, and to stay up-to-date on how the industry is responding, check out our industry blog.