The Cable Industry Conditions Are Ambiguous
The cable industry’s conditions are quite ambiguous for new firms thinking to penetrate the market. The cable industry consists of firms that operate in the wired, third party distribution systems for broadcast programming. These cable operators offer television programming from cable networks or local television stations to consumers via cable infrastructure on a subscription basis. It is important to note that the industry is different from satellite providers, Internet service providers, or VoIP services, whose main difference is in infrastructure. Main players in the cable industry operate on a nation-wide basis. The biggest threat to this industry is high barrier to entry. This is due to a number of factors. First, capital requirements are high because infrastructure is costly such as the fiber-optic lines that have been introduced to offer customers higher-priced, enhanced or bundled services. There is a medium level of industry concentration as the top four companies construct around 55% of the industry overall. Government regulations are also high, since operators must be licensed by the FCC through extensive registration. Thus programming rights, infrastructure investment, and high regulations present significant expenses and hardship for new firms entering. Barriers to entry, unlike all other factors in the five forces model, actually raises profits in a five forces analysis. This is because high barriers to entry prevent firms that could easily come into the market and take away profits. Other forces such as supplier power, buyer power, threat of substitutes, and industry rivalry, have moderate power in this industry. This would usually present a case of relatively lower profits in the industry – however we see that industry profitability is way above the industry average. It seems that the established firms in the industry are profitable because...
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