Analysts: Attention to Innovation, Budgets Gives Cable an Edge

By Mike Farrell -- Multichannel News, 6/20/2011 12:01:00 AM

Chicago — Innovative products like online content authentication and packages that are mindful of customers’ economic pressures will help cable maintain its competitive edge, a panel of industry analysts said here last week.

Most of the analysts participating on last Tuesday’s Cable Show panel “Profits, Platforms and Projections: Investment Analysts on the State of the Cable Economy” agreed that cable has weathered a slew of competitive storms: first from satellite, then from telcos and so far as been able to hold off threats from over-the-top services. But cable operators and programmers must continue to innovate to keep a step ahead of that competition, Collins Stewart media analyst Tom Eagan said.

Eagan added that over the past few years, the development cycle of new products has shrunk significantly, from about 12- 18 months to around six months today. That, he said, is a big advantage for cable operators.

And those accelerated development cycles have led to products like HBO Go and ESPN Live, which Morgan Stanley media analyst Benjamin Swinburne called game changers for the industry.

“Having these two embedded authenticated products is a major step for the industry,” Swinburne said. “Content and distribution have a critical relationship to move over the next 12 months into an exciting position.”

Keeping a step ahead of the competition will require a sharp focus on customer service, said Citigroup media analyst Jason Bazinet. And even though cable operators have made strides on that front, the perception is that they still have a long road to travel.

“Most consumers don’t like the way they are being treated by their cable company,” Bazinet said. “You are not giving consumers reasons to love your companies.”

Eagan said cable companies also can stay a step ahead of the competition by listening to their customers and identifying trends as they emerge. The analyst pointed to a common culprit for basic customer losses: sluggish new-home growth. He added that while newhome growth has been at its lowest point in years, single- person households have also been affected.

“The market seems to think that the people that churn out of pay TV can’t afford it.” Eagan said. “About 14% [of that churn] are single-person households. That rises to 16% to 18% in major cities who believe that cable isn’t worth it.”

That, Eagan said, is a segment of the market that cable has failed to address.

“On the base business, keep your variables open,” Eagan said. “On video, offer different prices to keep single-person households from going away.”

Bazinet agreed, adding that he has long proposed that cable operators develop pricing and packaging aimed at individual connections instead of households. That, the analyst said, would allow cable companies to charge more affluent households higher rates than those that are more price-sensitive.