Industry OutlookGrowth PotentialMarket Segment: Expected growth: (2009-2014)US 3%Europe 2.9%Asia Pacific 5.7%The Growth potential of the Cable and Broadcasting industry is sluggish especially when lookingat the US and European markets. The Asia Pacific market is the most promising out of the 3 but,none of the top companies have made a significant presence in that market. Rivalry has alsoincreased significantly due to the stagnant growth rates which are prompting companies todefend their market share. The industry isn’t growing its remaining relatively stagnant which isstimulating rivalry among competitors. The industry is expected to grow 3.8% for a 5 year period(2009-2014) the growth is a positive light especially when in 2009 the industry actually had anegative growth rate of 4.2%. According to Standard and Poor they are worried about theoutlook of companies in the industry with recent trends in cord-cutting and The TV everywhereconcept. Standard and poor also mentions the concern with the US economic situation being aspeed bump for growth. The U.S economic conditions affect companies in this industry becausemajor players in the industry depend heavily on the U.S market.Industry ProfitabilityNew Entrants The Profitability potential for new entrants in the industry is marginal at best. The growthrate in the industry is slow moving and the industry is dominated by 5 companies who own about80% of the market. This makes it hard for new companies to earn revenue with most of themarket being dominated. The growth rate of the different global markets is slow so there isn’tmuch room for them to come in and find a new niche market that hasn’t already been tapped byanother company. The industry is heavily influenced by economies of scale the high capitalrequirements are probably the biggest hurdle that most new entrants will come across. The highcapital requirements that new companies must overcome are insurmountable. Industry membersaccount a majority of their expenses to video programming. The specific numbers will beaddressed later in risk factors.Industry Members The profitability for current industry members is promising despite stagnant growth in theUS market. The slow growth increases competition drastically with their being such a smallconsumer base for companies to tap into as the market grows slowly. The demand has changedwhich forces industry members to adjust to that demand change and accommodate to consumersnew preferences. Industry members receive a vast amount of their revenue from individualconsumers and/or subscribers. Some of the driving forces companies must adapt to are newtechnological changes and internet capabilities. The increased popularity of VOD and DVRservices especially through tablet, Smartphone and PC’s have become a more innovative way to
appeal to consumers. The aforementioned driving forces can open up a new source foradvertisement revenue for companies. Time Warner cable is working with BlackArrow at themoment and Comcast is also in talks with them to provide a new form of advertisement. This canalso open up the door to increase their subscriber base by appealing to new consumers. Industrymembers can offer their subscribersOverall the industry is profitable for current industry members despite slow growth and stagnantnumbers. Advanced advertising revenue is expected to increase up to $4 billion by 2014according to analyst. The increase in Video on Demand services opens up a new door forcompanies to provide their content online for subscribers to access. Services like Netflix andHulu have opened the door for industry members to tap into that market and begin to streamlinecontent.Risk FactorsProgramming expenses The cost of programming is expected to continue to rise in the future which will affectindustry members operations. Programming expenses already account for a substantially amountof cost. Comcast accounts 52% of its operating expenses to its video programming in 2010 that’sa little over half of their expenses. DirecTV accounts 49% of its operating expenses to broadcastprogramming in 2010. Time Warner Cable 47% of their operating expenses are covered underthe category of video programming. The increase in cost could affect the various programmingthat industry members are able to acquire in the future. If they aren’t able to acquire theprogramming that consumers want this could lead to a decrease in their subscriber base.Economic conditions The weak economic conditions that the US market has been experience have rippledthrough every industry. It has made consumers more reluctant to spend money which wouldaffect consumers buying premium services from industry members. Consumers will only buy thebest premium services and also have become more aware of products and what’s offered to them.The weak economic conditions will continue to breed and increase rivalry among competitors onprices and the best services/products.Supplier Dependence Industry Members rely on various 3rd party vendors and some of those vendors are thesole suppliers of industry members. The demand for various products and services from supplierscould exceed their capacity. Suppliers also have a huge bargaining power with industry membersbecause of the heavy dependence. Dish network’s sole supplier is echo star while Time WarnerCable has three top suppliers (Samsung electronics, Cisco systems, Motorola). If supplierswanted to change terms of agreements or increase cost they could put industry members indifficult financial situations.
Digital Media The emerging new capabilities with the internet have posed a threat to industry members.Consumers are now able to access video content online for free or at a very low cost. Hulu andNetflix are the biggest examples of the new and emerging digital media. These new forms ofdigital media have effected how consumers want to watch TV. The traditional model isbecoming irrelevant cord cutting is the future. Industry members must adapt and deliver videocontent to consumers through new mediums at a competitive price.Pirating/Illegal activities The increase in internet capabilities and digital media has had an adverse effect on manyindustry members. Consumers are able to access VOD content for free and don’t have to pay tostreamline content. Consumers are also able to download movies and TV shows from variouswebsites. This poses a threat for industry members because they have to attract those consumerswho do access content online for free. There is also a threat that consumers who aren’t able toafford services or simply wish no longer to pay can switch to pirating.There are no severe problems in the industry that need to be addressed at the moment. There area lot of trends and changes but, there is nothing severe to affect the industry in a detrimental way.Attractiveness The industry is experiencing stagnant growth numbers in the US market where mostindustry members receive their revenue. This slow growth decreases the attractiveness of ourindustry. There is also stiff competition between competitors the bundle packages that areoffered by the leading companies in the industry is the biggest example. They all have similarpricing models when it comes to their bundles and offer similar services in their bundlestelephone, internet and TV which decreases the attractiveness. Industry profitability is affectedby the driving forces with the shift in demand for new and improved services. Streamlinedcontent has become a new way innovative way to appeal to new consumers and currentsubscribers. Netflix and Hulu are examples of streamlined content; industry members have anopportunity to earn more revenue by offering their content online. This would increase theattractiveness of the industry. There are several risks in the future such as economic conditions,supplier dependence and pirating. These risks could become hindrances especially witheconomic conditions since industry members rely heavily if not solely on the US market. Thiscan affect revenue for industry members where they rely on individual consumers for revenue.The driving forces in the industry make the industry more attractive. The short term costassociated with the changes that driving forces present to companies is a minor setback when toachieve long term goal. The short term cost could make the driving forces unattractive. Thedemand has shifted to new innovative services Technological change, emerging new internetapplications and marketing and service innovation are ruling the industry right now. The newtechnological changes can’t be overlooked or skipped over consumers are heavily driven andenthralled with technology. Industry members must adapt and offer consumers the newest andthe best and that unfortunately can come at an expensive price. The new capabilities consumershave with the internet are forcing companies to adjust and innovate with new marking conceptslike the advanced advertising. Streamlined content is also becoming popular and industrymembers are now offering consumers content online as well. The outlook of industry members
making a good profit shows potential which makes the industry attractive. Despite the stagnantgrowth rate the industry still is expected to increase its market value. The US market value isexpected to be $147,212 by 2014 that would be a 16% from 2009. Companies in the industryhave also continued to make a profit despite bearish economic conditions. Time Warner cablehas a 5.6% increase in their total revenue from 2009-2010 according to their 10-k. Comcast had a6.1% increase from 2009-2010 in their total revenue according to their 10-k. Advancedadvertising is also expected to increase in revenue to $4 billion in 2014. Companies have greatpotential to tap into a new medium for revenue and consumers will always want to beentertained.King, D. (2008). Providers Aim to Keep Up With Growth. Television Week, 27(8), 18-24.Retrieved from EBSCOhost.