1. Overall Competitive Attractiveness
The overall competitive nature of the industry has to be looked at from two difference
perspectives. The industry is vastly unattractive for new entrants with competition being so stiff
for new and smaller companies. New entrants are also competing with low cost substitutes that
may offer service to a greater capacity than what they can offer to subscribers. Substitutes like
red box, Hulu and Netflix may have a greater library of movies and television shows. New
entrants are also dealing with an industry with their being such a small amount of market share to
obtain. Larger industry members are also competing to strengthen their market positions and
solidify their current position with their being such slow growth in the industry. The industry is
also unattractive for current industry members with the heavy dependence of suppliers and
bargaining power of consumers. Industry members rely on a very limited amount of suppliers
and rivalry is considerable strong. Companies not only compete directly with each other but with
other companies that offer their services (Video, Phone and Internet) on an individual basis.
They compete with companies like Verizon Fios and T-Mobile whom may specialize in a
particular area rather than being diversified across 3 segments. Companies also have to deal with
substitutes that offer very competitive pricing and change consumer demand as well. Piracy is
also a problem because consumers can easily watch content for free on the internet instead of
paying for a service.
The industry is attractive for current industry members because despite the extreme competitive
nature industry members are still able to be profitable. The industry has very low switching cost
so the opportunity for companies to increase customer retention and implement customer loyalty
programs is now. The larger the companies subscriber base the more revenue they’re able to
bring in so increasing customer retention is one way to increase profitability. The industry is
experiencing slow growth but it is growth nonetheless. This allows companies to increase their
market share and strengthen their market position. The international market is also something
companies can tap into with their being faster growth internationally. The U.S market is
experiencing an economic recession which is where a majority of companies mainly do business.
Companies in the industry have also continued to make a profit despite bearish economic
conditions. Time Warner cable has a 5.6% increase in their total revenue from 2009-2010
according to their 10-k. Comcast had a 6.1% increase from 2009-2010 in their total revenue
according to their 10-k. Companies still have many opportunities to increase their revenue and a
variety of mediums to utilize for revenue growth.