When a market is described as being in “structural decline,” it means that the market is shrinking or contracting over a sustained period due to fundamental, long-term changes in its environment, rather than short-term or cyclical factors.
Several underlying factors can contribute to a structural decline:
Technological Changes: Advancements in technology can make certain products or services obsolete. For example, the market for DVD players has been in structural decline due to the rise of streaming services like Netflix.
Changes in Consumer Behavior: Shifts in consumer preferences and behaviors can lead to a structural decline in certain markets. An example would be the decline in demand for fossil fuel vehicles as more consumers opt for electric cars.
Regulatory Changes: Changes in laws and regulations can impact market conditions. For instance, stricter environmental regulations have led to a decline in some heavy pollution industries.
Demographic Changes: Shifts in population demographics can lead to structural market declines. An aging population, for example, might lead to a decline in markets for certain types of consumer goods.
Economic Changes: Larger economic factors can also lead to structural decline. For instance, markets tied to manufacturing may decline in regions that are transitioning to a service-based economy.
It’s important to note that a market in structural decline is not necessarily unprofitable. Companies can often still find ways to succeed in these markets by adapting their business models, finding niche opportunities, or consolidating market share. However, structural decline typically signals that a market’s best growth days are in the past.
Example: Broadcast Satellite Video Market
The video market… is structurally in decline
Eva Berneke, CEO Eutelsat
Eutelsat is not alone, many industry observers have suggested that the traditional broadcast satellite market is in structural decline. There are several factors contributing to this perspective:
Shift to OTT and Streaming Services: There has been a significant shift in consumer viewing habits towards over-the-top (OTT) and streaming services such as Netflix, Amazon Prime, and Disney+. These platforms deliver content via the internet, bypassing the need for traditional broadcast satellite services. This trend is often referred to as “cord-cutting.”
Technological Changes: Advancements in technology, including increased internet speeds, improved streaming technology, and the advent of 5G, are making it easier and more efficient to deliver video content over the internet rather than via satellite.
High Costs: Operating and maintaining satellites can be expensive, and these costs are often passed on to consumers in the form of higher prices for satellite TV services. In contrast, OTT services tend to be more cost-competitive, which is making them increasingly attractive to consumers.
Challenges in Emerging Markets: While satellite TV has seen growth in some emerging markets where terrestrial broadband infrastructure is less developed, even in these regions, the rapid expansion of mobile broadband is starting to pose a challenge.
In response to the structural decline of broadcast satellite services, Eutelsat is shifting its business model towards satellite broadband and mobile services.