Why do cable TV companies need to be early on next merger wave?
It looks like cable TV has begun its next change wave. Over time, it has been through many different levels. Until around two decades ago, this industry was growing. Back then, M&A was about consolidation and turning small cable TV firms into giants. However, the past two decades have been rough for the industry. This time M&A means something completely different. It’s about extending survival. So, what can customers and investors expect next, and when?
The details: Last week, Charter Communications and Cox Cable announced they are merging. Charter will acquire Cox. This is because over the past twenty years traditional cable TV is under attack from new tech and new competition. Today, we are starting to see some providers drop cable TV altogether. Now, others are merging.
Today, the primary service of cable TV companies is broadband
Most people do not realize this, but cable TV is struggling for survival. In fact, cable TV is no longer the primary service of these companies. Most are confused when they learn the primary services is broadband.
Wireless service like Spectrum Mobile, Xfinity Mobile, Altice mobile or Optimum, and Cox wireless. When cable TV started offering wireless, broadband and voice, I believe it was to solidify the customer relationship and slow customer loss.
Wireless carriers are starting to offer wireless broadband competing with cable TV
On a separate note, since traditional wireless service growth has slowed, the wireless industry is expanding into new areas. Now they are starting to offer wireless broadband. While that helps the wireless carriers, also negatively impacts the cable TV companies.
This move is new, and we will have to wait and watch what happens next. Will cable TV offer a wireless broadband in order to keep up with the new threat?
Until 20 years ago cable TV was on the rising side of the growth curve
In other news about the decline in traditional cable TV, we have heard stories about how Comcast Xfinity is talking about spinning off cable TV. If that happens, could they be next on the M&A parade? And of Comcast enters the mix, who else should we be keeping an eye on?
You see, until two decades ago, cable TV was a strong and growing sector. But thanks to the Internet and broadband, streaming services are growing and winning market share from cable TV.
Cable TV company attitude toward customer created this time of loss for them
Something most people don’t talk about is that this move, which is hurting the cable TV industry, was caused by the cable TV companies themselves. That’s right. They never took care of their customers. They focused on their investors. That meant there was no love lost between the marketplace and the cable television companies. The results is the customer is returning the favor and does not care about them.
I remember Comcast had an advertising strategy owning up to not being concerned with the customer. It was apparent they knew they were on the wrong path for decades. Since that point, they have done a better job taking care of the customer. However, that obviously did not work.
Cable TV created its own problems
As they continued to raise their prices year after year, the customer could only complain. They had no place else to go. Now with streaming and increasing competition, customer have options and cable TV is losing market share.
So, I think cable TV actually created the very monster they are battling today. In fact, we have seen how smaller cable TV companies are pulling out of cable TV. They are focusing on broadband and wireless. Many have market share in the single digits. They simply are not making enough to warrant staying in cable TV.
Will Xfinity, Spectrum, Altice and Cox continue down this path?
If you read my column, you will remember how I have been wondering when this would impact the major players including Comcast Xfinity, Charter Spectrum, Altice, Cox and others. Now, we have the answer.
There is a lesson every company and industry must learn from. First focus on your customer and your people and that will make your investors happy. This idea came from Herb Kelleher founder and ex-CEO of Southwest Airlines. It appears the once solid world of the traditional cable TV industry is fading and slipping away.
Broadband is now under attack from wireless broadband
To make matters worse, today broadband which is the replacement for cable TV is now also under competitive assault. I have been warning the cable TV industry for many years that they were heading in the wrong direction. Unfortunately, they didn’t change directions.
Now, traditional cable TV as an industry is shrinking. I believe it will ultimately fade away thanks to cable TV companies themselves. It will be replaced by streaming, wireless and broadband. That being said, it looks like M&A will keep things going for a while longer.
Cable TV industry continues to shrink against competition
So, what is next? Most likely, we will see more mergers and spinoffs. However, like always, growth must come from new areas. Cable TV companies need to create a new future full of growth and expansion. Will they? Who knows. I hope so.
However, while the cable TV industry will not just disappear overnight, it will change dramatically. In fact, it has been changing for the past 20 years, and I expect that to continue.
Cable TV companies need to innovate. They need to reinvent themselves in their own space. They need to transform the cable TV industry. If they don’t, competitors will, and in fact are doing just that.
Cable TV needs a shock to their system
Cable TV needs a shock to the system. They need to think in new ways. They need to innovate. The Ford Model T was an innovative new car. However, how impressive would the automobile industry be today if it never moved forward?
The announced merger between Charter Communications and Cox Cable is not a sign of strength. Rather, it is a sign of a weakened cable TV industry. It’s a way to slow the decline. As cable TV sector shrinks, pooling their resources is a way to add strength, for a while anyway.
New growth is coming from areas like streaming services, which is transforming how TV is consumed. The problem is new competitors and innovators are introducing new services, while cable TV is just trying to catch up. They need to flip this around. They need to be the leaders in the changing industry.
Can they turn this shrinkage problem into a growth solution? Yes, I believe they can. Will they? That’s the real question.
