THE CABLE PIPELINE

Courtesy Market Force Information, Inc

According to research performed by Market Force Information, Inc. movie watchers still prefer going out to enjoy the Theatre movie experience for various reasons, including:

• Experience of watching movie on the Big Screen
• Not wanting to wait to see new releases
• Enjoying a movie with friends
• Movie Theatres were a good venue to take a date

It seems like experiencing a new movie release has not changed in the many years since its inception; consumers view this as a justifiable and entertaining expense, at least some say every month. 70% of 3,000 responders indicated they would go to a theatre in the first three months of 2010 and one-third indicated a willingness to see three or more by the end of March.

Next in line for most viewers is the Kiosks where movie watchers rent movies from a retail outlet like RedBox with more than 40% saying they use this type service, while 26% of these consumers indicating a willingness to increase use of this venue.

Netflix and Blockbuster Online is being used by 27% of surveyed consumers with 21% saying they will increase their consumption.

Rounding out the movie content viewing experience is the Cable TV Industry with 15% saying they watched

Courtesy Market Force Information, Inc

movies through their monthly subscriptions with 18% indicating that their viewing would increase on this venue.

What does this research indicate about consumer habits and spending for video content-(movies)? The marketing adage of being first to market with new content evidently means something to the buyer. However, companies should delve deeper into consumer demographics, starting with age, income, and location. Which of the 3,000 surveyed are most likely to use each venue? Then target those consumers who are most likely to use your venue with the content they want to see most often.

But keep in mind there is a pecking order here. New Movie Releases are first sold to Theatres, then the Video-DVD markets, and thereafter released to Cable Companies. So, there is a compelling reason for certain consumers to visit Theatres, then Rentals, and finally Cable.

Advertising also plays a large role in consumer spending on video content. Respondents indicated by 70% that television was their primary source of learning about new movie releases, followed by movie-trailers, and last learning from friends and written reviews.

Although the Cable Industry is not first in the pecking order for new content, their venue is growing and will continue to increase with the right consumer data, pricing, and target marketing. At least cable channels are making revenues from the heavy ad placement of the studios.

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How could a startup company like Netflix get into the Pay-TV business and revolutionize the customer home viewing experience? Blockbuster learned the hard way by not heeding the concept began by the innovative entrepreneur Reed Hastings, and consequently is closing a thousand stores. Started in 1997 as a video rental by- mail business, Netflix eventually expanded the mail rental concept and included the internet, when nobody else believed that consumers would want to rent movies over a young and unproven medium by using their credit cards.

 After both believing in and refining the business model, Netflix has become an industry power to be dealt with by, not only the Blockbusters, but the Pay-TV industry as well. Although Broadband Internet and Cable VoIP Phone report higher subscriber growth than Netflix (see chart below); it is not far behind and continues to grow.

Subscribers By Pay-TV Type – (in millions)

Subscriber growth End 2^nd Qtr from previous year

Source Silicon Alley Insider

So what does this all mean in terms of winning the consumer loyalty, confidence and referrals that most companies strive to achieve? The bottom line seems to be the ease, convenience and flexibility that customers experience when dealing with Netflix. If ordering by mail with a monthly subscription fee, most customers receive their next video within one day after returning their last DVD. Videos are ranked by Netflix so customers can judge how well a movie plays within their vast customer base, while subscribers put their preferences in queue and order accordingly. However, with the ability to download and watch movies on your PC, Netflix has expanded their flexibility with its customers, a point that should not be taken lightly.

 As the chart indicates Netflix is adding more customers than Telco TV, Digital Cable and Satellite TV, which should have rival company executives concerned. Competitors need to take these concepts (to heart); consumer flexibility, convenience and simplicity in their relationship with the Pay-TV customer experience. The business model does not need to be complex, overpriced, or hold the subscribers hostage to purchase additional offerings. In essence, the customer experience should be delivered as promised, conveniently, on-time, and be flexible enough to add innovation and new experiences into the model.

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