Consumer Electronics and The Competitive Future of Cable vs. DBS vs. Telco
Consumer Electronics and The Competitive Future of Cable vs. DBS vs. Telco
By The Carmel Group’s Jimmy Schaeffler
There’s an awful lot of turmoil surrounding the U.S. multichannel video (MCV) and related industries these days, which raises an obvious question for readers attuned to consumer electronics (CE): What does that future hold for the CE industry, especially sales at retail?
The short answer is probably a good one. There will be more applications and more devices that will expose CE retailers to many more revenue streams.
Cable’s Crown
In general, cable is the MCV leader, and will continue to be the MCV leader for the foreseeable future. With its 63+ million subscriber base, cable holds nearly a 35 million subscriber lead over Direct Broadcast Satellites (DBS) and telcos combined, even in light of DBS’ rapid rise during the years since the DBS launch in 1994.
To add to its shine, cable has undergone a remarkable face-lift during the last 12 months, with a fresh, new look and more bells and whistles to offer consumers than ever before. For 2007, expect cable to continue to win over the majority of American viewers, but without the strong-hold monopoly it once had. Cable’s national roll-out of 2-way broadband Internet, telephone and audio-video “bundles” have been cable’s silver bullet.
For the future, The Carmel Group estimates that through 2008, cable’s video subscriber base will remain rather flat at around 63 mil. subscribers, while its Average Revenue Per Unit (ARPU) will increase markedly as more and more become subscribers of cable’s bundle.
DBS Directions
With its 28+ million subscribers, DBS has been nothing less than a spectacular success story for the U.S. government and the MCV industry, as well as for hordes of satisfied subscribers. Expect more of the same from DBS in the coming year, with more HDTV content, advanced interactive TV (iTV) programs, DVRs and set-top box advancements, as well as top-notch customer service. As for telcos, the Baby Bells are at least 18 months away from being a true competitive threat for the satellite industry which, even then, will only result in a minor market share encroachment of less than 2%. At that percentage figure, The Carmel Group estimates telcos will capture about 500,000 DBS and cable subscribers by year-end 2007. Indeed, that’s a large number for telcos, but a pinch for the two entrenched industries.
Going forward, The Carmel Group believes that by 2008, some 31 mil. U.S. TV households will be subscribing to DBS video services.
Telco Trials
To keep it in perspective for the telcos, it’s taken DBS more than 13 years to pull away less than 27% of the total multichannel video market. DBS accomplished its feat by way of more channels, digital quality, lower capital costs and technological superiority over cable. It goes to show that even with a better product and service, it’s tough in the MCV industry to switch and retain consumers. Without doubt, telcos have an uphill battle ahead of them, and for telcos to pull off a better growth track record than satellite will be a near-miraculous feat.
But telcos will be aggressively pushing and selling what they know best: broadband. Like cable broadband, the xDSL service has been a boon for telcos, especially when it comes to generating a strong new revenue stream. It’s the one area that continues to be a strong profit sector compared to other services, such as the lagging telco voice businesses. The telcos have hands-down beaten satellite when it comes to broadband performance and price. The longer the satellite industry stays behind on the field of broadband technology, the better the telcos’ chances to capture new subscribers. Additionally, services like broadband offer CE retailers additional opportunities to sell hardware and software built around this technology. A Cisco Linksys wireless router is one example this kind of revenue stream. The AT&T Homezone technology is yet another of possible future CE sales opportunities.
By 2008, The Carmel Group believes two mil. telco video subscribers will be tuning into video by telephone providers.
Hail HDTV
For now and into 2007, the HDTV segment will be the shining light for CE retailers. DBS and cable operators will be the key drivers of this advanced service hardware and software. And HDTV only get better for consumers, with greater amounts of local and premium content and lower hardware prices (averaging an estimated $750 per unit). Not surprisingly, sports and movies continue to drive the HD market, followed by local network programs and shots of huge potential from services like Cablevision’s 15 Voom HDTV channels.
Jimmy Schaeffler is chief service officer and senior analyst at The Carmel Group, a Carmel-by-the-Sea, Calif.-based conference organizer, publisher and consultancy. He can be reached at (831) 643 2222 or at jimmy@carmelgroup.com
.