On the minds of many at the Cable Show this past June was The Diffusion Group's (TDG) new report confirming operator fears: 32% of Netflix subscribers said they would downgrade their cable services within the next six months. Many bloggers and journalists hyped this as the death of PayTV. Cable operators are well aware of their challenge as demonstrated from these quotes from the Cable Show:
"We need to embrace all of the screens. There's no such thing as a TV anymore." Glenn Britt, CEO of Time Warner Cable.
"We have to be sensitive in making sure we have a product that consumers can afford," Pat Esser, president Cox Communications
"It is taking the brains of the TV and putting it in the cloud." Brian Roberts, Chairman and CEO Comcast (describing new Xcalibur service)
"Cheer up guys, at least we're not the music industry." Jeff Bewkes, Chief Executive of Time Warner Inc.
Operators are already working to counter the "Netflix effect." The new consumer wants to watch what they want, when they want and where they want. If you meet these consumers’ needs and they are already subscribing, you’ll keep them. Retention is far easier than acquisition. Here are some ways operators will try to give their consumers what they want:
- IP-delivered content to any screen: This will mean making many video formats for each program.
- Faster delivery rates: metered bandwidth means new billing (especially heavy Netflix users)
- Watch content any place: content owners will have to broaden rights if subscriptions are to go mobile. Advantage: Netflix…..at least for now.
- Functionality: Ability to personalize content, add social/sharing, control DVR.
- Video Conferencing: Make this a reality for every connected TV.
Comcast seems to be leading the way with these features on their service. The long-rumored Xcalibur is now in live tests in Augustus, GA. With IP-delivered apps, the ability to personalize and use social features is also available. Comcast just announced a new partnership with Skype too for video conferencing and Intel/Pace for smarter set top boxes. All the big operators have already made apps for tablets or are in the process.
One final thought: No pipes no Netflix. Consumers will continue to need an internet connection. This is not going to be shaved or cut anytime soon as online video viewing only continues to climb. The cable industry won’t be dinosaurs in a tar pit but will actually be in the forefront of making entertainment available to their subscribers exactly the way they want it. Lots of content plus lots of competition for delivery is making for lots of good options for consumers.