Here is what the highly respected, Wall Street Journal owned Barron's had to say about Comcast earlier this week:
"……it appears to have only one way to go and that is down. There are many pressures creeping into Comcast's market that will almost certainly introduce a new kind of competition that Comcast does not seem poised to deal with. Mainly, the disruption of television services by Google among others……" (source: Barron's October 3 2012)
In other words, Comcast is in danger of losing relevance to newer companies delivering content. And these are companies whose origins are firmly based online, not in entertainment or cable distribution. Instinctively that feels right. As we consume more and more of our home entertainment on our tablets and computers and phones aren't Apple and Google better placed?
So are we at a watershed for cable platforms? Comcast is huge, well managed and performing very successfully, as are other cable companies, but we are already seeing cable victims of "disruptive media".
LodgeNet: the sign of things to come
Has anyone been following LodgeNet, the hotel cable network that reaches 1.2M hotel rooms with its "OnDemand" VOD service?
Its once highly cash generative business is suffering badly and its share price is firmly in the toilet. True it's still generating cash, but its cash flow is declining dramatically and looks to be inadequate to repay its debt.
LodgeNet's fundamental issue is relevance to today's consumer. The hotel guests are no longer separated from their home entertainment when traveling. We have our lap-tops, tablets, Wi-Fi, NetFlix and Hulu. When the guest is in the confines of the hotel room, LodgeNet no longer has a monopoly.
At its last earnings call LodgeNet reported a 7% decline in revenue per room per quarter.
It also suffered a 7% decline in hotel rooms in its network. (Presumably if you're losing relevance with the hotel guest you lose relevance to the hotel owners too.) So that's a 14% decline per quarter in the core business revenues.
New CEO, Richard Battista has some work to do. We wish him well.
Are Comcast or Time Warner Cable going to travel the LodgeNet path?
Well cable companies generally and Comcast in particular have more lines of defense than LodgeNet has.
Firstly, we use that big fat pipe that they provide to connect our devices to the content we want.
Secondly they have bundled subscription services for cable TV channels, as well as strong pay-per-view revenue while LodgeNet is reliant on pay-per-view.
Thirdly, and what I regard as a smart hedge, Comcast now owns content through NBC Universal. In this decade, where distribution of content is moving so rapidly from broadcast to point-to-point, content regains its crown and is Content is King once more. (Time Warner Cable, now a separate entity to the Time Warner content business, is not in the same position.)
However, just as LodgeNet no longer has a monopoly on the hotel room, neither Comcast nor TWC any longer have the monopoly on providing video entertainment to a particular home. If you've had a monopoly, and got used to it, with all those little price increases and slipping service standards that monopolists allow, and then you lose that monopoly you better watch out.
You can no longer expect your customer wait 3 weeks for a replacement set-top-box, or serve him notice that he's about to be charged $3.95/month for the modem that was previously provided free. That's right Time Warner Cable! I can feel your blushes from here!
So Cable Guys, check out LodgeNet and be warned…..
Matthew Kearney has been working in the media in London and New York, in TV, cinema and in online for nearly 20 years. He joined the Daily Mail's leading news site MailOnline last year. Matthew can be reached at firstname.lastname@example.org.
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