Customer experience about to become a cable priority
This article was first published by dmcityview.com
Some things in life are painfully inescapable. If you’re a parent at some point you inevitably be your child’s nemesis. No matter how friendly you are with your boss, on occasion you will see them as a brainless stooge. Finally, if you are a cable subscriber, without fail you will come to hate your provider with the fire of 1,000 suns. The list of awful is seemingly endless, but thankfully as society, time, and technology progress many of these problems get erased. The most recent to start disappearing before our eyes is none other than customer-combatant cable providers.
Subscription cable is almost what economists deem an “inelastic good,” which means no matter the flux in supply or cost of a product, consumer demand will remain nearly the same. The reason cable is not a textbook inelastic good is because there are multiple alternatives supplying the exact same product; specifically satellite service, online streaming, and antenna based TV. For a true inelastic good look no further than beer. Even though there are hundreds of adult beverages, nothing tastes like malt, hops, and barley except beer. People love beer and will pay stupid prices to get it. As for cable, with the number of cord cutters mounting and cable costs climbing, its elasticity is starting to show.
Another sign of cable’s escalating elasticity comes courtesy of the federal communications commission. A brand new FCC ruling has erased cable’s monopoly on set top boxes. Before last week subscribers were required to use any device or set top box cable providers required, locking consumers into whatever pricing structure the provider deemed appropriate. Under the new ruling consumers can use third party set top boxes or media dongles to access cable services.
While this may seem like a rather small development, consider the economics of this move to cable providers. Generally, set top boxes are leased from cable companies to subscribers for roughly $25 per month, or $300 per year. With roughly 50 million cable subscribers in America, that means this ruling has the potential to cost the cable industry $15 billion dollars annually in revenue. Few budgets can tighten their belt that forcefully without cutting circulation to its extremities. Of course, not all cable subscribers are going to drop their set top boxes tomorrow in favor of Chromecasts, Rokus, and Apple TVs. So the cable industry is safe for the moment, but long-term survival depends on doing something it's never done before: care about customer experience.
See elastic goods are the whim of a competitive marketplace. If fedoras become more fashionable than baseball caps, than hat retailers will put fewer caps on the shelves and cap designers will need to get busy crafting fresh looks. If consumers get wise to fact that superior media tools can be substituted for ugly, slow, and complicated cable set top boxes then you better believe they’ll make the switch. So now an industry renowned for its horrible customer service and half-baked tech actually needs to take into account customer experience and ease of use.
At the very least, big cable is about to make a huge in its billing practices. Only the most foolish of consumers would pay a $25 monthly fee for a crummy product like most set top boxes, when a Chromecast, Amazon Fire Stick, or Roku can be bought outright for less than $50. Still, we are talking about consumers who burn money subscribing to cable when nearly everything you can access through said service can be streamed for much cheaper online. I guess cable’s elasticity is safe, for now.
Patrick Boberg is a central Iowa creative media specialist. For more tech insights, follow him on Twitter @PatBoBomb
Some things in life are painfully inescapable. If you’re a parent at some point you inevitably be your child’s nemesis. No matter how friendly you are with your boss, on occasion you will see them as a brainless stooge. Finally, if you are a cable subscriber, without fail you will come to hate your provider with the fire of 1,000 suns. The list of awful is seemingly endless, but thankfully as society, time, and technology progress many of these problems get erased. The most recent to start disappearing before our eyes is none other than customer-combatant cable providers.
Subscription cable is almost what economists deem an “inelastic good,” which means no matter the flux in supply or cost of a product, consumer demand will remain nearly the same. The reason cable is not a textbook inelastic good is because there are multiple alternatives supplying the exact same product; specifically satellite service, online streaming, and antenna based TV. For a true inelastic good look no further than beer. Even though there are hundreds of adult beverages, nothing tastes like malt, hops, and barley except beer. People love beer and will pay stupid prices to get it. As for cable, with the number of cord cutters mounting and cable costs climbing, its elasticity is starting to show.
Another sign of cable’s escalating elasticity comes courtesy of the federal communications commission. A brand new FCC ruling has erased cable’s monopoly on set top boxes. Before last week subscribers were required to use any device or set top box cable providers required, locking consumers into whatever pricing structure the provider deemed appropriate. Under the new ruling consumers can use third party set top boxes or media dongles to access cable services.
While this may seem like a rather small development, consider the economics of this move to cable providers. Generally, set top boxes are leased from cable companies to subscribers for roughly $25 per month, or $300 per year. With roughly 50 million cable subscribers in America, that means this ruling has the potential to cost the cable industry $15 billion dollars annually in revenue. Few budgets can tighten their belt that forcefully without cutting circulation to its extremities. Of course, not all cable subscribers are going to drop their set top boxes tomorrow in favor of Chromecasts, Rokus, and Apple TVs. So the cable industry is safe for the moment, but long-term survival depends on doing something it's never done before: care about customer experience.
See elastic goods are the whim of a competitive marketplace. If fedoras become more fashionable than baseball caps, than hat retailers will put fewer caps on the shelves and cap designers will need to get busy crafting fresh looks. If consumers get wise to fact that superior media tools can be substituted for ugly, slow, and complicated cable set top boxes then you better believe they’ll make the switch. So now an industry renowned for its horrible customer service and half-baked tech actually needs to take into account customer experience and ease of use.
At the very least, big cable is about to make a huge in its billing practices. Only the most foolish of consumers would pay a $25 monthly fee for a crummy product like most set top boxes, when a Chromecast, Amazon Fire Stick, or Roku can be bought outright for less than $50. Still, we are talking about consumers who burn money subscribing to cable when nearly everything you can access through said service can be streamed for much cheaper online. I guess cable’s elasticity is safe, for now.
Patrick Boberg is a central Iowa creative media specialist. For more tech insights, follow him on Twitter @PatBoBomb
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