201-How to Fail in a Market You Dominate

The cable T.V. companies are the big dogs in the television industry. So far, no one has been able to unseat them, though they seem to be trying to unseat themselves. The cable industry is losing customers to satellite T.V. and phone companies entering the video market. The rate of these customer losses is significant.

In 2006, the cable T.V. companies controlled nearly 69 million video customers. By 2009, that number had fallen to 63 million. (See the Symptom & Implication, “The industry leaders are losing share” on StrategyStreet.com.) The problem is both price and service. Many consumers see these cable T.V. companies failing on both Price and Reliability. (See “Video #14: Definition of Reliability” on StrategyStreet.com.)

The cable T.V. companies have responded to the incursions of satellite and phone companies with discounts. Most of these discounts come in the form of bundles of products, including two or three choices among T.V., internet and telephone. Some of the discounts came in the form of free services during a promotional period. Still, the prices for cable T.V. have gone up every year faster than inflation. The discounts slowed, but did not stop, customer defections. Customers felt gouged.

A more troubling failure has come with customer service. We have all heard that power corrupts. Well, the cable T.V. companies had great market power for a long period of time. That power didn’t corrupt them in the moral sense, but certainly caused them to ignore the common tenets of good customer service. They offered service on their terms. Customers could take it or lump it. And customers became resentful.

Of the two failures, one of high prices and the other of Reliability failures with poor customer service, the most troubling is the Reliability failure. People tend not to forget and forgive Reliability failures for a long period of time. General Motors will be living down its reputation for less than stellar automobile quality for a long time. The same fate awaits the cable T.V. companies. (See “Audio Tip #35: How Does a Company “Fail” in a Market?” on StrategyStreet.com.)

Posted 7/6/10

Update:

The performance of the cable TV industry over the last 16 years has been an epic failure. The industry has held a price umbrella over its competition and is gradually being driven from the market.

Cable TV prices have risen far faster than inflation over the last 10 years. The cable TV industry is in a Leaders Trap and is rapidly losing market share. Cable TV dominated the TV market for many years. The industry began losing customers in 2006. By 2022, the industry was losing between 4.5 and 5 million subscribers a year. In the July 2022 US market, streaming captured 34.8% of the total market, surpassing cable TV at 34.4% and broadcast TV at 21.6%.

The cable TV industry has set an umbrella over the streaming market. Companies like YouTube and Hulu  have used this umbrella to raise their prices at an even greater rate than has the cable TV industry. However, the streaming competitors have been careful to keep their prices notably below those of cable TV so they continue to gain share. See HERE and HERE for more explanation.

10/22

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