Running Head: MARKET MODEL PATTERNS OF CHANGE
Market Model Patterns of Change
ECO 550: Managerial Economics and Globalization
June 2, 2013
Market Model Patterns of Change
Comcast Corporation is one of the world’s leading media, entertainment, and communications companies. It is principally involved in operating cable systems through Comcast Cable and is the nation’s largest pay-tv provider to residential and business customers with more than 22 million subscribers. Comcast Corporation is the majority owner and manager of NBC Universal, which owns and operates entertainment and news cable networks, the NBC and Telemundo broadcast networks, ...view middle of the document...
Not only did reception improve, but television sales grew. Walson continued to work on improving picture quality by using coaxial cable and self-made amplifiers, thus bringing CATV to each home (History of Cable, 2013). Cable television was born.
By 1952, there were 70 CATV systems set up across the country and they served approximately 14,000 subscribers. Once the range of reception was increased, more channels could be offered and cable television became even more attractive. Ten years later there were close to 800 cable systems and more than 800,000 subscribers which motivated investments from large corporations like Westinghouse and Cox. Local television stations were feeling the pressure and decided to complain to the FCC (Federal Communications Commission). The FCC responded by placing restrictions on cable operators’ ability to receive distant signals and the growth of the industry came to a screeching halt. The introduction of pay television in the 70’s and the Cable Act of 1984, allowed the industry to operate more freely and put an end to their growth struggles. Another attempt to slow industry growth was launched in the 90’s by new government legislation, but to no avail (History of Cable, 2013).
After implementing new wiring projects across the country, developing broadband networks, and introducing digital cable, high definition cable, and video on demand access, cable television has become an extremely important part of many households. Currently approximately 60% of households in the U. S. subscribe to cable television with the majority coming from middle-class households. Comcast alone serves over 6 million customers and has over 22,000 employees (Our Story, 2013). The market has undergone a complete evolution over the years and looks very different from when Comcast was the new kid on the block. With the entry of competitors such as Verizon Fios TV and DIRECTV, their monopolistic market no longer exists. As a result, they were forced to expand their product offerings and to enter other markets.
Like any other business, the main goal of Comcast Corporation is to increase profit share thus increasing profits. As the only supplier in a monopolistic market, the price Comcast expected to receive for its initial output would not remain constant as their output increased. Thus, their short run behavior would be based on the need to minimize production costs and maximize market penetration. As such they would initially lease a central location in which the equipment needed to provide cable television for the service area could be housed. They would also start with a technology database that is expandable in preparation for growth through innovation and would need to be able to adjust the labor numbers as demand increases. In the long run, as the market changes and new firms begin to enter, Comcast could increase the number of service areas, thus increasing the number of buildings they purchase for operations. They could also...