The Cable & Telecommunications Association forMarketing interviewed three of the most influential leaders and creative thinkers in thedigital and pay-per-view businesses to get their thoughts on the digital future. They areMichael Bair, president, product management and marketing, Cablevision Systems Corp.; LeeClayton, president, Clayton Ventures; and Jamie McCabe, vice president, worldwidepay-per-view, Twentieth-Century Fox Film Corp. All three are also co-chairs of thisweek's CTAM's Digital & Pay Per View Conference in Los Angeles.
CTAM: What excites you the most about cable's digitalfuture?
Bair: The digital age is cable's opportunity toredefine its relationship with customers by creating a unique experience that competitorscan't match. Cable companies have made important advances in customer service,reliability and technology over the years. However, in the digital age, excellent customerservice and reliability will be an expectation, not a goal. Customers will expect -- orrather, demand -- a new level of products and services that cable is uniquely positionedto offer today.
We want customers to look to their cable provider for atotal communications and entertainment experience. The digital box can become the gatewayto this experience, connecting people to other communities; offering entertainment ondemand -- the list of product opportunities is endless. However, the key to success forcable is to learn from the Internet phenomenon: the customer defines the business based ona desire to use your products and services.
Cable must combine outstanding customer service andtechnological advancement with an array of innovative products and services to create anew customer experience.
If we deliver, the revenue potential for cable companiesand programmers is enormous.
Clayton: We are finally reaching the point where"convergence" is truly happening. The potential products and services that canbe provided to the consumer are more innovative, exciting, and appealing that ever before.The key will be identifying what products and services the consumer truly desires and atwhat price, within all that the technology and creativity will allow us to offer.
In addition, the potential revenues that can be generatedfrom growing areas of e-commerce, such as music, are significant. We can now see thatconvergence will result in not only expanded choice and control for the consumer, butincreased revenues for the operator as well.
McCabe: As a distributor of movies, the most exciting thingabout the digital future is the opportunity to greatly enhance the electronic delivery andexhibition of entertainment for the consumer. Increased channels and on demand[functionality], coupled with VCR-like functionality from the next generation of boxes,may enable pay-per-view, near video-on-demand, and video-on-demand to become a preferredway to watch movies at home. As someone who has lived through the frustration of analogPPV, this is very exciting.
CTAM: What scares you the most?
Bair: Cable's current technical and infrastructureadvantage over most competitors will quickly erode as competition for customers in thedigital environment becomes more fierce. There is no guarantee that cable's broadbandinfrastructure will be superior in cost or technology in the coming years.
So how will cable stay ahead of the curve? Peter Drucker, aleading business philosopher, has long believed the true purpose of business is to"create a customer." Therefore, the core competencies of an enterprise should bemarketing and innovation.
My fear is that cable has lost the entrepreneurial edgethat made this business great. If we squander our current market advantage by offeringsimple incremental improvements in products and services, we are destined to become therailroad of the 21st century. For example, are digital tiers a revolutionarynew experience, or a low-risk method of squeezing incremental revenue through repurposedcontent and new niche services?
Clayton: Competition! It will be more than we have everfaced. In addition to direct-broadcast satellite, technological changes are allowing otherplayers to enter the marketplace more cost effectively than in the past. Plus, withbroadband high-speed access to the Internet, content providers have the capability toreach the consumer directly, without having to go through the cable company. While thereare technological limitations related to the quality of video streaming today, these arebeing addressed and will very soon no longer be an issue.
In essence, cable's current role and relationship tothe customer will be seriously challenged and the industry will need to respond.
McCabe: Two things scare me: complacent attitudes andrepeating the mistakes of the analog world. When we replace a customer's analogservice of two or three channels with 10 to 35 impulse-ordered channels and an electronicprogramming guide, buy rates will improve dramatically. However, technology will enablemore choice and convenience for all programming, and there will be even more competitionfor consumers' time and money.
I worry that there won't be the marketing and customerservice investment to make the PPV/VOD business realize its full potential. There is alsoa third thing: as digital becomes ubiquitous, protecting copyrights will become morecritical than ever.
CTAM: How will the exciting array of interactive andon-demand offerings change our business?
Bair: The array of new digital products and services willbe overwhelming and dozens of competitors will offer them. Even today, we see manycompanies claiming the ground of high-speed cable modems.
This early competitive skirmish shows that marketing willbe critical in winning the battle for market share. Cable owns the lead now, due to thecable modem's technical superiority, but the challenge will occur when productdifferences narrow, the early adopter market is saturated, and competition is ubiquitous.
We need to think about how the Internet's free-marketenvironment and the flood of promises from digital world competitors will redefinecustomer expectations and behavior. Only then will we be able to market the cableofferings as a truly superior experience for consumers.
Clayton: In addition to creating new revenue streams,consumers likely will begin to modify how they use television. Research has shown over andover again that what consumers want is more choice, but as choices expand, they willdemand more control over how and what they watch.
Interactivity is a key tool for providing both the expandedchoices they desire and a means by which to control what and how they watch TV. Inaddition, certain applications will address a third key consumer demand -- convenience. Nomore running to the video store or CD store. It will all be available to the consumerdirectly in their home.
As new product applications are developed, interactivitywill also change the content side of the business. For example, interactive applicationswill be needed that work specifically on the TV set, in concert with video programming, toensure that the product provided remains "video or TV-centric." That's oneexample of many changes to expect.
McCabe: Simply put, it will change everything by puttingthe customer in the driver's seat. Existing programming will be delivered much moreefficiently and all types of new programming that take advantage of the Internet andadvanced set top box capabilities will emerge.
CTAM: How are you advising people in the industry toprepare for the digital world?
Bair: My advice is that marketers should know all aspectsof the business, including technology, finance, billing, field service, and so on -- andunderstand how all of these activities affect customers. Become the customer expert andadvocate, and share that knowledge with the rest of the company. Remember, marketing andinnovation are the key to cable's future. We should be leading the charge.
Clayton: We've got to keep thinking outside of the boxand always let consumer demand drive our thinking. We need to be careful not to allow thecapabilities of the technology to drive our choices. If you haven't already, get upto speed on the technology issues related to digital, Internet access via a digitalset-top box, the Internet and where broadband-content development is going. And stayflexible. Anything related to these newly developing areas seems to change scope anddirection on a daily basis!
McCabe: We need to read and understand as much as possibleto about the technological advances and capabilities. But we also need to remember thatmost customers just want to be easily entertained. We should remember to focus on the"basics" before getting caught up in the sizzle of new applications, because Idon't believe technology will solve all problems.