Are you Data or Entertainment? Time to Choose

We have said several times here that at some point carriers are going to have to choose what they are — an entertainment provider or a data transport provider. In the market you can’t wear both hats. Like cattle, carriers can’t carry more than one brand in the marketplace on their hide. With the market meltdown of the last 2 weeks that decision point is neigh —

American shoppers went into hiding in September, sticking to buying the bare-bone essentials and leading many retailers to report dismal sales for the month as skittish consumers grappled with the financial meltdown spreading around the globe.

The weak reports on Wednesday — an alarming gauge of consumer behavior since the meltdown began midway through last month — are fueling more worries about the holiday season and the overall economy, since consumer spending accounts for two-thirds of all economic activity.

Given the sharp falloff in sales and customer traffic, many retailers, including Target (TGT), J.C. Penney (JCP), Kohl’s (KSS), Saks (SKS) and Nordstrom (JWN) cut their outlooks as they use aggressive discounts to pull in shell-shocked shoppers.

Just the tip of the iceberg folks. Americans will be buying coats and shoes rather then a new XBox for Johnny. The household budget is going to get looked at too. Why carry premium channels, HD, internet and phone? Well the pitch was relative cost averaging to get all those services in one bundle from a single supplier. Well in a downturn that gets thrown out the window. Absolute cost will reign supreme. Premium channels — gone, HD — gone, basic cable — for many gone. They will probably keep the internet access. They need that for email and the job search. Besides if you think about it, a NetFlix account and TVoIP is a rock bottom entertainment choice.

For the carriers, its crunch time! The first decision they need to make is which are they? If they continue with the entertainment play they risk seeing massive swaths of revenue if not down right user base go right down the drain. Changing brand to a data carrier means you survive but at a much reduced revenue level. But at least you survive. Somebody like DirectTV, I don’t see how they make it if the economy is sour for a long period of time.

Content providers like Sony, MGM, et. al. will be looking longingly at cutting the middleman out finally. Keep that slice for themselves. Traditional broadcast suppliers CBS, NBC, ABC could very well say ‘to hell with the affiliates!’ partner with their production providers, ink a deal with Hulu and go direct with TVoIP. Even niche players like BET, CBN might band together as a channel house and go TVoIP. Bottom line, we are likely to see supply chain collapse in the entertainment industry with the channel providers cut out.

Other than raising rates and applying caps what are the carriers going to do? But it is time to choose.

Linky.