Customer experience is about to become a cable priority3/2/2016
Some things in life are painfully inescapable. If you’re a parent, at some point you inevitably become your child’s nemesis. No matter how friendly you are with your boss, on occasion you will see him or her 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. But 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 (FCC). A 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 has never done before — care about the customer experience.
Elastic goods are the whim of a competitive marketplace. If fedoras become more fashionable than baseball caps, 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 the fact that superior media tools can be substituted for ugly, slow and complicated cable set-top boxes, 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 change 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. CV
Patrick Boberg is a central Iowa creative media specialist. Follow him on Twitter @PatBoBomb.