Is Customer Experience Cable’s Biggest Advantage?

 

2015 is looking like it will be the beginning of a tipping point in which US consumers will be able to subscribe a la carte to television networks over-the-top (jargon free, that’s HBO, etc. without a cable subscription).

Tabling individual feelings about this inevitable shift, cable companies have certain significant advantages over the networks that are about to go direct. This is independent of the apparent consumer desire to “cut the cord,” and it’s the networks that need to be careful in how they transition to include a new, direct-to-consumer, model.

First, it’s important to simply summarize the business model of each based on the customer (who’s paying) and the product (what’s being sold):

mso-network-business-model.001
These business model differences are the core of where the advantages lie for cable companies:

  1. Customer Service: Because the cable company customer is the consumer, they already have robust systems ranging from automated and live phone support systems to online chat in place for resolving a wide variety consumer service issues quickly (While consumers often complain about cable company customer service, it’s important to distinguish the difference between resolving service related issues and dissatisfaction between the pricing of subscription packages).
  2. Quality of Service (QoS): Cable companies generally own and maintain their own physical networks, meaning they provide television services end-to-end from the facility where they receive network satellite feeds all the way through the last mile to the consumer’s television. As a result, they have very consistent uptime and can troubleshoot, and resolve, service related issues anywhere down the line, from their facilities to the individual consumer’s home.
  3. Program Guide: It may sound antiquated in a world rapidly transitioning from live to time-shifting to on-demand, but one of the things that’s lost on all over-the-top devices is the discovery of programs by way of a cross-channel guide (and queueing by way of recording) . This is especially important for networks’ fall lineups, which have precious little time to build an audience, and to older demographics resistant to any change in how they find or watch programs.

So, what are the networks’ primary challenges?

  1. Brand Awareness: Networks have two levels of branding, corporate and program franchises. Networks deeply care about their corporate brands, but consumers primarily care about programs. From a viewership perspective, removing the layer of a guide by going direct forces a change to a “network first” mentality in order to find programs that consumers may not embrace (Consider how well record label websites did in the late 1990’s when they tried to circumvent Tower Records and HMV).
  2. Customer Service: Networks have always fielded calls from consumers in the form of complaints about programs, but they’ve never had to directly support a consumer customer base. Going direct means they have to be staffed and equipped to resolve a world of issues including account authorization / verification, payment processing, connectivity, crashes and more for the first time. This isn’t trivial, and can have a direct impact on customer perception of the corporate brand.
  3. Pricing: The cost of a top-tier network subscription isn’t likely to be less than the ~$8.00 / month a Netflix or Hulu Plus account currently charges. In addition to a live feed and on-demand current programming, networks will need to have substantial and desirable back catalogs to both draw consumers and minimize churn. Additionally, if a lower overall bill proves to be a primary driver for the consumer, networks may end up having to compete for consumer dollars like CPG companies before they even have the opportunity to compete for eyeballs.

While networks definitely have the opportunity to be successful in a direct distribution model if they scale accordingly, it’s hardly a “doom and gloom” scenario for cable companies if they leverage their significant strengths in Customer Experience.