THE CABLE PIPELINE

While it is tempting for Cable Executives to listen and be led by Wall Street to take advantage of actions that may have a short-term positive effect on shareholder value; the true course of action has to sit with the CEO’s ability to steer the organization in long-term strategy, and ignore the blustering of short-sited manipulators out for a “grab and run”.

 By that I mean the so called Wall Street analysts, which can manipulate stocks in the short-term, while eyeing to take advantage of any scenario that could turn a profit. This type of manipulating is nothing new. Take for instance the history of insider trading that has mauled Wall Street for the last two decades, including Levine, Siegel, Boesky and Milken: The Precognition Rat Pack ; R. Foster Winans: The Corruptible Columnist; and Martha Stewart: The Homemaking Hoaxer; not to mention the last attack which almost drove our economy over the precipice with the collapse of Fannie Mae, Freddie Mac, Bear Stearns, Merrill Lynch, Lehman Brothers, AIG and the rest didn’t happen overnight.

These debacles have all been orchestrated as the result of market deregulation, in essence, giving a free hand to those who wish to manipulate markets and company stocks while taking advantage to make themselves rich. What; isn’t this capitalism at its best; not hardly? So, while I have written that the FCC should tread lightly in considering rules that would harness the ISP networks (see Private Investment: FCC Should Tread Carefully On Broadband Rules ); Cable Executives should think about the implications of cordoning off their pipelines in an effort to capture the large and growing market of ISP users.

The current climate of (a call for more regulation of the internet) is not just rhetoric; it is the culmination of scary abuses by Wall Street and companies wanting to take advantage of their large networks to become another (Standard Oil) or (AT&T) of old. Since the industry has enjoyed a largely deregulated market, which I might add they lobbied heavily to obtain; why invite more scrutiny from regulators due to ill thought out business plans? Do not be fooled into believing that Congress will not pass legislation to curb abuses; it has happened in the past and will certainly come around again, if the industry invites it.

There is difference in servicing a large market to take advantage of the size and scope of those services, and offering the innovation to what customers want out of those services. This is the key to long-term success; not controlling the pipeline.

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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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