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NON-TV HOMES: WHAT DO THEY PORTEND?

By Angelina Li

According to Nielsen, nearly 5 MM homes in U.S.A. are non-TV homes, meaning that they are not connected to cable or satellite.  Calling them “non-TV” homes is probably a misnomer because a large majority of them have other TV-like appliances (smart-phones, tablets, laptops…per Charlene’s question) which they use to access many traditional programs via Netflix, Hulu, websites of various programmers, etc.  The so called cord cutting phenomenon should not, therefore, be interpreted as a rejection of “TV programming” in general.  However, the fact remains that rapidly evolving technology is creating many new options for consumers to access different types of programs.  Cable operators appear to be better positioned to give consumers what they want, due to their ability to provide access to both cable and broadband networks.  This is, of course, assuming that cable companies are ready to innovate quickly in order to take full advantage of the available technology and to respond to the changing needs and preferences of consumers.  The implication is that in the future, the cable TV industry is likely to become increasingly more segmented and multidimensional.  In this environment, rapid recognition of new market opportunities will become a key factor to success.  Specifically, “non-TV” homes are likely indicative of a new opportunity segment in the market which could be tapped with different price/product configurations.  In this respect, a framework for recognizing and analyzing market opportunities may be a useful tool.

To repeat a cliché, we live in the information age and the cable TV industry is in the business of selling “information” to consumers in the broadest possible sense of the term. Notwithstanding rapid changes in technology, the fundamentals of consumer behavior with regard to information consumption remain basically unchanged.

The most unique factor of information consumption is that it is constrained as much or even more by the availability of time than by the availability of economic resources.  This is why unrelated “information” consumption options compete with each other–books with video games, cable network programs with YouTube and so on.  In dealing with the opportunities and threats in our business, it is important to remember that competition for time is a zero-sum game.  Consumers must find the time needed to use a new product/service at the expense of time used for something else.

Secondly, success in the information market depends on giving consumers: (1) the content they want, (2) when they want it and (3) where they want it, with (4) minimal effort on their part and (5) at the least possible cost to them.  We find that every successful product/service in the information market throughout history has been propelled to success because it improved information delivery to consumers on one or more of these five fundamental needs.

Our ability to better satisfy at least four of these five needs is greatly improved by technological advances. The only need that technology does not help adequately satisfy is the need for “high quality” content.  Understanding what content consumers want and how to create it remain the great imponderables of the information business.

The technological advances that have accelerated innovation in information businesses are happening mainly in three areas: (1) information storage technology–the cost of storing vast amounts of information continues to decline at a tremendous rate, (2) computing speeds of microchips–this technology continues to get exponentially better every day, and (3) data transfer speed–the process of moving vast amounts of information from one place to another continues to improve while the cost of doing so gets lower and lower due to the advances in networking technology. These developments in the realm of technology will continue to pose new threats and present new opportunities in the cable TV industry as we know it today. The issue of and the concern about non-TV homes is symptomatic of this ongoing evolution of our business.

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