CICIORA’S CORNER - Frenemies
Almost no one is a pure friend or a pure enemy
Frenemy is a combination of “friend” and “enemy.” It’s a little hard to pronounce, and there are various spellings.
This is an interesting concept, primarily because it describes a fundamental reality. Friends share the same goals. Enemies have conflicting goals. Almost no one is a pure friend or a pure enemy. Most of our acquaintances, partners, spouses and business relationships are a combination of shared goals and conflicting goals – part friend, part enemy.
Understanding this can lead to maximizing the friend part and minimizing the enemy part.
We see this kind of relationship in the cable industry between cable operators and program suppliers. Mostly we share the same goals, but we part company when programming is made available to competitors – or when programmers become competitors. We also see this between cable operators and equipment vendors. The cable operator wants certain functionality at the lowest possible price. The vendor wants the best price for what is already in stock.
There has been a frenemy relationship for decades between the cable industry and consumer electronics. Great programming sells TV sets, while great TV sets sell premium programming. We’ve seen that in HDTV. Multiple channels of HDTV motivate consumers to purchase large flat-screens. Large flat-screens becoming pervasive increases the demand for HDTV programming. That’s the friend part. We likely are going to see this in 3-D, as well. The not-so-friendly aspects involve struggles over the cable/consumer electronics interface, program guides, the on-screen “look and feel,” and, now, over-the-top program access via the Internet.
For the first time in memory, cable is losing subscribers. This is partly due to the economy and partly due to alternative ways of obtaining programming on multiple devices. There are just too many ways to get video (and audio).
Why does the consumer electronics industry behave this way? To understand this, we need to appreciate the consumer electronics drivers. The progress of technology in the consumer electronics industry is unstoppable. Moore’s Law states that every 12 to 18 months, the number of digital transistors available for a given price approximately doubles. This has been going on for several decades and appears to have some vigor left for the near future. The most important consequence is cheap, massive memory.
Memory allows signals to be stored, compared and processed. The processing then reduces the amount of memory required to store the signals. Compression greatly reduces the required transmission bandwidth and the size of storage media. Magnetic storage of hours of video in consumer electronics products has fundamentally changed the way programming is consumed. Digital processing allows error detection and correction, making two-way small distance wireless communication circuits inexpensive. This makes it practical for consumer electronics devices to be interconnected and communicate with each other. Fewer wires and fewer holes to drill make these devices much more attractive.
While the original proposals for HDTV were analog, digital made HDTV practical. But HDTV is not much better than standard-definition on small screens. HDTV needs large screens. The old picture tube gets deeper as the screen size grows. And it gets very heavy. There reaches a point where the picture tube just won’t fit through the door! Picture tube TV can’t become big market HDTV. Flat-screens are needed, simply to get in the door and be manageable from a weight perspective.
Flat-screens require memory. The old picture tube used a synchronized scanning of the electron beam to convert a one-dimensional linear signal into a two-dimensional image. Flat-screens do not have the picture tube-like scanning. The signal must be stored in memory. Digital memory makes that possible.
The result is relatively inexpensive devices, which communicate with each other and have screens that can display programming, often on an on-demand basis.
High-speed Internet access for most of these consumer electronics devices is the worldchanging element. Now all of these devices can access video on the Internet without a cable subscription, just an Internet connection.
This OTT path is a serious competitive threat, especially for the youngsters who spend more time texting and accessing the Internet on cell phones than their parents and grandparents. Cable needs to figure out how to capture the attention of these future subscribers.
In the meanwhile, don’t forget the elderly. They are most likely to stay subscribers.
The important point for the cable industry is that it now has serious competition from multiple sources. It must respond to that competition with superior services. Fortunately, the competition is a confusing mess at present. Cable must have better-quality programming, but, more importantly, cable service must be easy to use. The quality programming must be easy to find, and, when a subscriber has trouble with the equipment, the signal, even the bill, the service must be prompt, correct and courteous. That’s the way to keep winning in this challenging environment.
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