Cable’s dominant position in the US multichannel television market is under threat, as a growing number of subscribers are choosing to leave their operator and switch to a new access provider. This is the conclusion of recent analysis by technology researchers at The Yankee Group.
in spite of the efforts being made to promote digital cable and high-speed internet services, it is calculated that cable’s share of multichannel business has declined to 80%. Consumers appear to have little loyalty to their operator and high churn rates together with competition from satellite are making life difficult for the cable industry (see
Digital Cable To Overtake DBS In The US).
According to the latest report, Building Brand Identity in the Multichannel Video Universe, consumers regard satellite TV as better value than cable and there is a percepetion that cable operators are preoccupied with technology and price promotions.
Multi-system cable operators have invested large sums in order to widen the channel capacity and impove the digital quality of direct broadcast cable. The Yankee Group estimates that the technology had spread to 18.9 million US homes by the end of December but notes that growth slowed to approximately 4 million net additions in 2002, down from 5 to 6 million in the previous two years. The reasons for this were outlined in another study entitled Poised to Surpass DBS, Can Digital Keep up the Pace?
“To attain a high level of penetration, cable operators must overcome three major market hurdles,” said Aditya Kishore, Yankee Group Media and Entertainment analyst. “First, digital penetration is leveling off at 35 to 40 percent of subscribers. Second, high churn rates continue to plague the industry. Third, debt-burdened MSOs are under pressure to generate free cash flow, hampering their ability to rapidly conduct capital-intensive plant upgrades.”
Nonetheless, with video-on-demand, interactive and enhanced TV, personal video recorders and high-definition TV (HDTV) set to invigorate the market, it is predicted that there will be 39 million digital cable homes in the US by the end of 2007.
