PHYSICS

Cable operators are at the core of the cable TV revolution, supplying popular family shows, news, movies, sports, documentaries and other products to a growing swarm of eager subscribers. Consumers are increasingly willing to pay for entertainment that suits their interests. For example, the introduction of high-definition (HD) TV vastly improved the quality of shows and attracted subscribers, even as disposable income dropped. New networks and channel offerings have also strengthened the Cable Network industry's appeal to consumers. "Revenue is expected to increase at an annualized rate of 5.2% over the five years to 2012, despite a drop in advertising spending that stemmed from increased competition from other media (including the internet) and lower corporate profit," IBISWorld industry analyst Agata Kaczanowska said. This growth was the result of increasingly specialized services that cable networks provide, enabling them to charge premium prices to key consumers. In 2012, the Cable Networks industry is estimated to garner revenue of $17.9 billion, representing 5.5% growth that year.

To keep up with the growing subscriber base, the industry is expanding its offerings and focusing on customer service and outreach. This trend involves social networking, website development and application development, along with traditional call centers. As a result, the industry is expected to employ about 36,280 people in 2012, representing five-year annualized contraction of 0.2%. New independent networks are also increasing in popularity, especially as production and distribution costs wane, Kaczanowska said. This is the chief reason for 0.8% annualized enterprise growth to 406 firms in 2012. The Cable Networks industry is projected to fare well during the next five years. Further consolidation within the industry is projected to continue to strengthen the position of industry operators, leading to a continued growth in profit.

The industry's top four players - The Walt Disney Company, Viacom Inc., Time Warner Inc., Comcast Corporation and News Corporation - make up about half of its revenue. However, many smaller networks are also linked by programming or aggregation agreements with the larger networks. There are, however, Federal Communications Commission (FCC) limits on the extent of vertical integration between the cable networks and distributors. Satellite delivery of programs continues to aid this process, but currently, four of the top six cable multiple system operators (MSO) also hold interests in this growing form of program delivery. Just as industry concentration increased over the past five years, concentration should continue to rise over the next several years.