Shifty Soil

When the earth quakes, you either endure the trauma, relocate or eventually get swallowed by a gaping hole that appears beneath.

fault-lineMarkets often have tectonic transmutations whereby old terra firma is relocated. This occurs with alarming frequency in technology markets — the upper rings of Hades are littered with tech companies that did not move quickly enough (you have long teeth if you remember names like Ashton-Tate and VisiCalc). Yet fault line spotting is a rare sport in high tech, and even catches change makers by surprise.

One massive market plate is on the move, and television as we know it is about to disappear.

Commodity broadband is making highly selective, on-demand video entertainment a reality. In the bad old days (last year) one consumed video entertainment by subscribing to ever expanding channel bundles packaged by cable and satellite companies.  The economics of broadcast television — where producers, networks, cable companies and affiliates all got a piece of the action — caused prices to rise and competing providers to package bulkier sets of networks. We long for simpler times when there were 57 Channels And Nothin’ On, not 999 channels with even less worth watching.

The same companies who made residential broadband affordable also provided the means for Hulu, Netflix and Amazon to entertain you, without rigid schedules and no packages of unwatched programming that rivaled food for a chunk of the family budget. Now cellular providers are entering the same space, making video entertainment an always-on and on-demand experience. Who cares that you missed The Simpsons on Sunday when you can replay that episode whenever and wherever you are, and pay nothing or very little (I survive on a $100/year Netflix habit while my neighbor pays that much per month for cable).

This shift is forcing cable and satellite companies to unbundle channel packages. After years of raising rates 6-10% a year, cable companies are facing an a la carte future. But unbundling is only half the shift, the part that frees customers from the unwanted expense of renting unwanted programming. The other half is on-demand viewing of all content types. Cable and satellite companies have offered on-demand movies, but customers are now acquainted with on-demand everything. Want to see last night’s Colbert Report, reruns of All In The Family or even live concerts? It is all available and you don’t have to pay your cable company a dime more than your monthly internet connection fee.

Cable companies may devolve into mere broadband providers as the market eliminates many middlemen (as I write, independent producers are getting their materials online in near-direct distribution arrangements, promoting via social media). Cable companies didn’t see the shift they themselves created, and built no replacement. Unbundling channels is a delaying tactic, but one that will not stop the inevitable downhill slide.

The marketing lesson is that you must watch for fundamental changes in technology that fundamentally change your markets, or conversely create those technologies and predict where the earth will open. Failure to do so means watching everything get swallowed and ground between moving plates.

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