Monday, October 29, 2007

A Rock And A Hard Place

The internet, by and large, has not created a new world order. It has changed an old one. There has been some organic growth in the markets it has changed, but the old adage that for any force, there is an opposite and equal force, persists and other markets have declined as online sales have grown.

So, in a mature market threatened with considerable change, US cable giant Comcast has again reported a fall in its viewers.

Down the years the Roberts clan has built and crafted a cableco that encompasses the most lucrative markets in the US, as witnessed by their carve up of Adelphia. The trouble is that they long ago reached the regulatory limit of 25% market share and have now exhausted the opportunities to get the best markets.

The company has done reasonably in moving into the world of triple play, but the competition from Uverse and Fios is beginning to show.

The main lesson from this is that there is a finite market with a finite appetite for television.
In any other market I'd argue that the problem is that the market is inefficient, but such has been the success of television ad sales departments in obtaining huge revenues for not very accountable deliverables that the market is so skewed that bringing in efficiencies is next to impossible. Also factor in people's reluctance to buy content when so much is available for free.

In an efficient market greater revenues should spring from an ability to deliver more targeted advertising. In the television world there is little doubt that revenues will fall as advertising becomes accountable.

So, where does Comcast go for growth ? The solution for cablecos in a saturated market, therefore, is to take the triple play, make it a quad play and then to keep on adding services. They are, at the end of the day, a utility company.

The world's largest internet grocer, British supermarket Tesco, is facing similar challenges in a different market and their solution was to enter foreign markets. Expect Comcast to follow suit.

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