A typical reaction to competition is to innovate in order to beat out the competitor. The circumstances in the media industry are not very different at the moment. With the growth of the Internet, many other traditional media are having a hard time competing. Illegal file sharing online has caused a threat for the music industry. The option for people to download free movies has caused fear in the eyes of producers and filmmakers who are having their material distributed for free, and are therefore not making any profit off of if it being viewed online.
The cable industry is no exception for this. Many cable TV shows are now available to watch online without directly paying for the service. Therefore, the cost of business is going up. Advertisers are moving their money to the Internet; the way for Cable TV to make up for this loss in ad-revenue is to charge consumers more. However, subscribers might not be willing to pay the higher fee. If subscriptions decrease, advertisers will not be willing to pay as much for time and the cycle will continue with the cable industry losing even more money.
At the moment the “percent of households with cable or satellite television is 64 percent [in the United States],” (ttp://www.eia.doe.gov). However, the question is will this number change as subscription fees for channels such as HBO and MTV increase. According to PBS the average cable TV bill of 2009 was $75 (PBS, 2010). “Cable prices have risen 77 percent since 1996, roughly double the rate of inflation, the Bureau of Labor Statistics reported this month” (New York Times, 2008). Cable channels are charging their users more money because of the loss they are experiencing in advertising revenue. This revenue is going toward the Internet.
However, cable companies have come up with innovations to help it compete with the Internet and to make cable TV more attractive and useful for advertisers. The number of people watching shows online is growing rapidly and with it is the threat to cable TV. “People are viewing millions of videos online each month — albeit mostly short video clips, and not Hollywood movies. At the same time, the use of file-sharing tools like BitTorrent to download illegally popular movies and television shows is growing,”(New York Times, 2008). Whoever attracts the most advertisers makes the most profit. The cable industry is making changes that will ideally draw advertisers back to them and away from the new medium, the Internet. This principle is called adaptation.
An example of adaptation is set-top box data and a software platform called “Tru2Way”. Set-top boxes act as receivers for cable services, but they also make TV a more interactive experience. “A set-top box is a device that enables a television set to become a user interface to the Internet and also enables a television set to receive and decode digital television (DTV) broadcasts” (Searchnetworking.techtarget, 2001). According to searchnetworking.techtarget.com an estimated “35 million homes will use digital set-top boxes by the end of 2006.” However, now the concern is arising that cable companies might be able to use these set-top boxes to monitor what people are watching. This would be a huge advantage for advertisers who could create custom ads for specific cable consumers. An article “Cable TV Advertising Endeavor Raises Issues of Privacy” in the Los Angeles Times brings up this important point and whether or not Congress will allow cable companies and advertisers to operate this way, and use set-top boxes to bring certain ads to specific people. “Congress put cable TV operators on notice that it would scrutinize their plans to roll out targeted advertising to viewers, questioning whether they would use set-top boxes to monitor what people watch,” (Los Angeles Times, 2009). The article goes on to talk about the possible outcomes of this practice: “That would mean, for instance, that pet food commercials are routed to households likely to have pets, based on a tendency to watch TV shows about animals.” The privacy issues are not only about ethics but using this data could have tremendous legal consequences for cable companies, states the article. “If cable companies use set-top box data in the future for targeted advertising, McSlarrow said, they will have to comply with existing cable laws protecting private consumer information,”(Los Angeles Times, 2009).
The software platform “Tru2Way” is another method of keeping track of what consumers are interested in. According to the National Cable and Communications Association Tru2Way can do all this without even using a set-top box. “With wide-ranging ability, Tru2Way can be used to create and deploy new applications and features that appear on the TV screen with a click of a remote, such as: interactive entertainment, interactive games, shopping, music, news, weather, local information, sports, advertising, polling, banking, e-mail and chat functions” (National Cable & Telecommunications Association, date retrieved February, 13 2010). This information is extremely valuable for advertisers and if the cable companies could get a hold of it, advertising companies would pay a lot of money to advertise to customers using Tru2Way. By knowing what brands people shop and what music they listen to, ads could be custom made to attract viewers, grab their attention and lead them into buying certain products.
It is hard to believe that this phenomenon will not occur in the future, when thinking about how the websites we visit are already known to many advertisers, and ads appear on our profiles on MySpace or Facebook. And if the internet can attract advertisers that way it won’t take long for the cable companies to make use of things such as set-top boxes and Tru2Way. These applications show the importance of new innovations to an ever-changing industry. If the Cable Industry wants a chance to compete with new media, it has to adapt and that is exactly what it is trying to do by using data-mining devices such as Tru2Way.
References
Mark Glaser. PBS. (01/08/2010).Your Guide to Cutting the Cord to Cable TV. Retrieved February 13, 2010, from
http://www.pbs.org/mediashift/2010/01/your-guide-to-cutting-the-cord-to-cable tv008.html
Matt Richtel.New York Times.(5/24/2008).Cable Prices Keep Rising, and Customers Keep Paying.Retrieved February 13, 2010, from http://www.nytimes.com/2008/05/24/technology/24cable.html
Searchnetworking.(11/5/2001).Set Top Box.Retrieved February 13, 2010, from.http://searchnetworking.techtarget.com/sDefinition/0,,sid7_gci212971,00.html
Los Angeles Times.(4/24/2009).Cable TV advertising endeavor raises issues of privacy. Retrieved February 13, 2010, from
http://articles.latimes.com/2009/apr/24/business/fi-ct-cable24
National Cable & Telecommunications Association.Tru2Way – Full Brief. Retrieved February 13, 2010, from
http://www.ncta.com/IssueBriefs/tru2way.aspx?view=2
EIA. (3/26/2009). The Effect of Income on Appliances in U.S. Households. Retrieved February 15, 2010, from
http://www.eia.doe.gov/emeu/recs/appliances/appliances.html
Mike Reynolds.Broadcast Newsroom.(01/31/2010).Lifetime, Outback Team On ‘Adventurous’ Creative Course. Retrieved February 15, 2010 from
http://www.broadcastnewsroom.com/articles/viewarticle.jsp?id=971610&afterinter=true
The Nation.(11/02/2009).Cable-TV advertising expected to double in ’10. Retrieved February 22, 2010 from
Antone Gonsalves.Informationweek.(10/16/2008).Comcast, Panasonic Join In First Tru2Way Service In U.S. Retrieved February 22, 2010 from http://www.informationweek.com/news/personal_tech/TV_theater/showArticle.jhtml?articleID=211201021