Tv Cable Industry Identification

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Based on the understanding of cable suppliers, we can find some factors that affect the supply growth. First is the cost of producing goods. To become cable suppliers, you need to choose among becoming content creators, content aggregators and distributors. The choice of each path means a huge amount of money as a support. For example, as cable telecommunication distributors, in order to build their own cable network, companies have to dig the streets of the city and then lay down their own cable, which means billions of dollars in cost. This feature leads to a high entry level for new entrants and influences the growth of suppliers.

What’s more, the improvement of science and technology will also affect the growth of supply. In the course of development of cable industry, it’s not difficult to find that the technological innovation disrupt the industry for many times. From the broadcasting network to cable network, it relies on the maturity of cable and fiber industry. Newly rising companies like Netflix depends on the rapid advancement of Internet. It is foreseeable that in the near future the VR technology will make the industry revolution and change the existing pattern.

PEST Analysis (external driving forces that are causing the industry to change)

After analysis the factors that influence the demand and supply, people may still have no idea about the overall situation of the cable industry. To deep understand the characteristic of an industry cannot be separated from the analysis of macro-environment. We’ll use PEST analysis to help us visually illustrate the industry's external environment.

Political: Political factors may contain many aspects, such as the political stability in the country and international pressure groups. In the cable industry however, the most important factor is that the whole industry is subject to the FCC (The Federal Communications Commission) and the regulations imposed upon it. It should be kept in mind that the TV shows and other programs are always under the FCC restrictions, any small violations will lead to fines that range from thousands to millions of dollars. What’s more, another important thing is needed to be kept in mind is that as an independent department of the government, FCC has its political influence on cable industry. The most typical example is the New Set-Top Box Plan announced by FCC chairman at the beginning of 2016.[5] In January, chairman Tom Wheeler released a manifesto of sorts about the need to ‘Unlock the Box.’ and caused a great uproar in the industry. In the most recent version of the FCC proposal, the FCC would have required large cable and satellite TV companies to make their content available through free apps.[6] Although this action helps break the gate of cable industry and give consumers more choices, the cable company will suffer a loss from the potentially decreasing of subscriptions and the ads sales.

Economic: Companies and industries will be directly influenced by many economic factors such as currency exchange rates, interest rates, inflation rate and costs of labor and raw materials. In cable industry, inflation rate and the currency exchange rate play roles. As mentioned above, the revenue of cable companies comes from the payment of cable subscribers as well as the advertisers. Thus, as the inflation rate or exchange rate increasing, the cost of putting advertisements will also increase, which will affect the decision of the sponsors to make investments in this industry. What’s more, the high production cost will also be a reason to be considered. As mentioned above, the high cost of laying cables and producing television programs keeps high market entry threshold for new entrants and keeps the major players at the top.

Sociocultural: In today's society, a major feature of the consumers is the trends of time fragmentation. Busy life schedules and diversified entertainments no longer allow consumers to have fixed time sitting at home to watch TV. According to a survey, the daily time spent watching TV per capita in the United States decreases every year, from 314 minutes in 2010 to 289 minutes in 2015. The trends cannot be ignored that obviously consumers lose interests in spending more time on watching TV.[pic 2]

In addition, the fact that consumers are no longer satisfied with uniform products but want to have customized products is one of the most significant social tendencies in these days. In the past, the consumers have no bargaining power, as audience, they can only passively accept the programs from the cable industry aggregators or distributors. In this case, cable-TV bundle exists for decades, although most people don’t want to pay for the programs they are not interested in, they have to do so.[7]

Technological: With the development of technology, the accessible to Internet and mobile phones is easier than any other time in the history. With a large segment of entertainment taking place through the Internet platforms and streaming media, the industry needs finding ways to grow concerns from advertisers that this would cut out opportunities for advertising as they could be eliminated through pirating. Another technology advancement is the new forms of entertainment such as 3D and HD, which transfer consumers’ attention to movie cinema.

In conclusion, the PEST analysis can be summarized as follow: In Political, there are regulation restrictions of creating programs and political pressure from departments such as FCC; in Economic, sponsors concerns on inflation rate and exchange rate and high production cost are the factors; and in Sociocultural, there are time fragmentation avoids people staying at home and personalized customization needs; at last the Technological, the increased use of online and mobile devices for viewing and new forms of entertainment such as 3D, HD are the factors.

Explain the key challenges faced by the industry

Times are changing, with the enhanced technology, the industry could be reversed at any time. Based on the above PEST and demand & supply analysis, we conclude some of the challenges the industry is facing and will make further discussion in the next part.

Threats of OTT producer[pic 3]

Another threat comes from OTT producer. According to a survey from Leichtman Research Group, the number of pay TV customers has additions in year 2012, however, facing the cord cutting from 2013. In 2015, the number of cord cutting people increases to 383.47k.

In contrast, the number of Netflix streaming subscribers increases every year, from 21.4 millions in 2011 Q1 to 47.5 millions in 2016 Q3. It can be seen