Information Cascade: Television Service Providers
http://www.twice.com/article/476171-DirecTV_Reports_Q3_Revenue_Subscriber_Growth.php
Surely you have heard of the ongoing competition between the various major television service providers in the United States. This intense competition usually boils down to three major providers: DirecTV, Dish Network, and cable service providers. People’s decisions in choosing which provider or switching between providers can be explained by information cascade.
The article above tells of DirecTV’s third quarter growth this year. A 13.6 % year over year increase in total revenue was observed. The net increase in U.S. subscribers was 327,000, up from 174,000 at the same point last year. DirecTV now has a total of 19.76 million U.S. subscribers, up 4% from last year. DirecTV’s competitor, Dish Network, on the other hand has reported a net loss in satellite subscribers. Reports from various cable providers have also indicated a decrease in subscribers. These numbers show that recently more people have been switching to DirecTV than any other television service provider. This phenomenon can be explained by information cascade.
Information cascade is all about people making choices based on other people’s choices, and this is exactly what has happened with people switching to DirecTV based on my observations. First of all, it seems that DirecTV has had a much more appeal advertising campaign, especially during this fall season due to its broadcasting of NFL season games. This has attracted many football fans who wishes to watch HD broadcasts of NFL games. And the cascade starts from there. Once a sizable group of people have been convinced to switch to a service provider, their family, friends, and coworkers will follow suit based on the assumption that these initial switchers had a good reason to switch to DirecTV. As a result, more and more people are switching from Dish Network and cable to DirecTV. In fact, I have observed this on a personal level. My family used to get television through Dish Network. However, one day, my dad came home all excited and told us how he switched us to DirecTV and how it was a much better deal than Dish Network, but when I asked him how exactly it was better, he couldn’t provide a proper answer. He just said that everybody that he knows was switching to DirecTV, and so there had to be a very good reason. This is exactly what information cascade is all about: people make choices without direct reasoning, but instead base their choices on other people’s choices, whom they assume used direct reasoning. As seen in this case with switching television service providers, this phenomenon occurs in everyday life.