Legacy Decline is Slow, at First, in Video Entertainment, Computing or Communications

In three different legacy businesses--video entertainment, communications and computing--we see examples of how robust markets eventually mature and then decay. 

Apple. for example, might be on the cusp of transitioning from a fast-growing technology company to a slower-growing dividend-paying company, as many would argue already has happened to Microsoft. 

Canada has one of the highest pay TV penetrations in the world, estimated to reach nearly 90 per cent at year-end 2012, but like the US, IHS Screen Digest expects that pay TV penetration will be on a relentless yet shallow decline decline through 2017, as many newly formed households are less likely to take a traditional TV service. 

And AT&T seems to hitting something of a wall as well, as its recent earnings report show revenue is flat. If Long Term Evolution is doing anything other than compensating for declining revenues in other areas (parts of the consumer fixed network business or enterprise), it isn't immediately clear. 

But it also is important to note that even if firms such as AT&T, Apple and cable companies are at a point where the growth curve flattens, there is nothing to suggest inevitable rapid decline after a peak has been reached, or passed. 

In other words, transitions often build for long periods of time, with only apparently marginal and incremental changes in buyer behavior. But every big change eventually reaches an inflection point, where change is quite rapid. 

The big challenge is avoiding too much optimism about what can change in the near term, and too little optimism about the magnitude of ultimate change after the inflection point is reached. 

For suppliers, what happens, ideally, is a gradual decline, occurring over a relatively long time, allowing a firm time to reignite growth some other way. 

On the other hand, the technology business, especially the computing business, offers a rather bracing lesson for computing suppliers. 

Leaders in one era rarely survive as leaders of the next era. Some would argue the same process has been at work in the entertainment business, as it evolved from stage to radio to movies to television. 

The big question is how communications might change. Some would note that we are only now at the first big change in industry dynamics, as voice services cease to be the revenue driver. 

And though there is much logic to suggest the Internet access business largely will replace voice as the underpinning of the business, it is not axiomatic that today's suppliers of such access inevitably are so dominant in the future. We just cannot tell. 

Though Internet access will remain a capital intensive undertaking, precisely how much capital it will take, and who can do it, will be a somewhat open question in the future. 

And though one might argue that access providers these days are in a multi-product business (mobile voice, fixed voice, video entertainment, Internet access), there also are examples of "disappearance."

AT&T, for example, never was able to evolve beyond its "long distance" revenue dependence. Nor did MCI. As crazy as it sounds, we cannot say for certain, today, how Internet access will be supplied in the future, and by whom. 

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