The Yankee Group Reports Satellite TV Threatens Cable's Dominance

Business Wire, Feb 26, 2003

Business Editors/High-Tech Writers

BOSTON--(BUSINESS WIRE)--Feb. 26, 2003

As multi-channel video programming becomes ubiquitous, direct

broadcast satellite providers are slowly eroding cable's foundation.

Today, 87 percent of U.S. households subscribe to some form of multi-channel video programming. A new Yankee Group report, "Building Brand Identity in the Multi-Channel Video Universe," shows that while cable remains the primary source for multi-channel video programming, its share of subscribers has declined to 80 percent, including 2.5 million homes that subscribe to both cable and direct broadcast satellite (DBS) TV. Overall, the total number of cable subscribers is declining.

Another challenge to incumbent cable providers comes from overbuilders, including RBOCs, that are installing competitive cable systems in key markets.

"While cable operators continue to have success selling digital cable and cable modem services, a shrinking subscriber base is a growing problem," says Michael Goodman, Yankee Group Media & Entertainment Strategies senior analyst. "Once a subscriber churns, it is difficult and costly to reacquire them. Furthermore, it is one fewer home to sell advanced services to--limiting future revenue growth."

Although cable companies continue to add new digital cable and high-speed Internet subscribers, competition is driving down the overall number of cable subscribers. Cable subscribers feel little loyalty to their providers. Instead, they view their cable provider as a stodgy, unresponsive monopoly.

The study also finds that:

Consumers do not migrate to DBS due to its low cost but because they perceive it to be a better value

Early adopters represent multi-system cable operators' best hope for short-term revenue growth

Price is not the only incentive for consumers

Cable operators spend too much time on technology and price promotions

NOTE TO EDITORS

For interviews, Michael Goodman, mgoodman@yankeegroup.com.

THE YANKEE GROUP (www.yankeegroup.com)

The Yankee Group is a global leader in technology research and consulting. Our customers, which include technology vendors and users, benefit from our accurate, reliable, and trusted research, consulting, and personalized one-to-one client interaction covering communications and IT products and services. Now in our fourth decade, the company is headquartered in Boston and maintains offices throughout North America, Europe, Latin America, and the Pacific Rim.