• Cable’s Business Model: Fewer Customers, Higher Prices

    by  • August 19, 2014 • Cable Choice • 5 Comments

    In every other business, driving away customers means losing money. But not in the cable industry.cableTVprices

    According to an article in The Hollywood Reporter, “Seven of the 10 most profitable cable channels have seen total viewership fall significantly” in the last year. At the same time, revenue from advertisers buying commercial time has fallen 5%. Yet somehow, cable’s profits have kept climbing: MTV, FX, and USA have all seen increases in profit, despite smaller audiences; and the Disney Channel has seen a 5% increase in profit, despite losing a whopping 12%  in prime-time viewership. How can this be? The answer is simple: increased customer fees.

    Every month, millions of consumers pay their cable or satellite bill. Every channel gets a slice of that bill, even though most viewers only watch a handful of them. And the entertainment cartel keeps raising the price per channel: in 2012, every subscriber paid $1.09 per month for the Disney Channel, even if they never watched it. This year, they’re paying $1.15. The same is true of every other pay-TV channel.

    Furthermore, the big entertainment conglomerates keep increasing the number of channels in the package – thus forcing subscribers to pay even more. At the same time that inexpensive, family-friendly channels like INSP, Hallmark Channel, and RFD-TV are having trouble getting carried on cable systems (because they’re independent and not owned by one of the major industry conglomerates), Viacom, ABC-Disney-ESPN, Fox, and Comcast-NBCUniversal continue to create new channels nobody has asked for or wants, then charges customers for them anyway.

    Surveys have shown that the vast majority of pay-TV subscribers watch 17 channels or less. Yet in 2008, they were paying for 129 channels in their cable package; and last year, the number of channels shot up to 189, with no end in sight.  Even ABC-Disney CEO Robert Iger admits that “there are a lot of channels that have questionable brand propositions”; yet he and the other media cartel bosses continue to create more channels – and force viewers to pay for them.

    And the situation may get even worse. If Congress and the FCC approve Comcast-NBCUniversal’s proposed merger with Time Warner Cable, or AT&T’s merger with DirecTV, “these mega-entities [will have] more leverage in future fee negotiations,” says The Hollywood Reporter. If the Comcast-TWC merger goes through, the resulting company will control almost a third of the cable households in America – and even more of the nation’s Internet access.

    The media cartel’s bosses are utterly unashamed of their blatant extortion against consumers. Comcast executive David Cohen even boasted that, if the merger with TWC is successful, “We’re certainly not promising that customer bills are going to go down, or even that they’re going to increase less rapidly.”

    This is what every pay-TV household in America has to look forward to.

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    About

    Christopher Gildemeister is the PTC’s Head of Research Operations. He began as an Entertainment Analyst at the PTC in 2005. From 2007-2016, he was Senior Writer/Editor, responsible for communicating the PTC’s message to the public through newsletters, columns, and the PTC Watchdog blog. Dr. Gildemeister holds a Ph.D. from The Catholic University of America.

    5 Responses to Cable’s Business Model: Fewer Customers, Higher Prices

    1. Allen Anderson
      August 22, 2014 at 10:06 am

      our local cable co recently dropped the viacom chs from their lineup because when the contract came up for renewal the cost to renew it was too much. they are a small co so they join forces with other rural telecommunications cos to negotiate and all decided it was too much. do not miss vh1 mtv etc but do miss tv land among others

      • Christy
        August 22, 2014 at 6:53 pm

        We are using just an antenna & get 3 channels that are similar to the old TV Land.

    2. Christy
      August 22, 2014 at 6:48 pm

      They keep charging high rates because we keep paying. We HAVE to have our TV! We got fed up with the cost & got a digital antenna for under $100. It works great, is super clear & we receive 15-20 channels including all our local news & networks. Free TV for us — we’ve saved around $2,000 over the last couple of years! No regrets here.

    3. Debbie
      August 23, 2014 at 10:22 am

      I pay around $100 a month for cable and I don’t watch it often. The History Channel doesn’t show much historic entertainment. There are way too many stupid “reality” tv shows. The weekly episodes are just that-one episode all week long, 7 days a week. The Disney channel is teaching our girls to be silly fashionistas while spending their time bugging their parents to take them to buy Disney merchandise and vacation at Disney resorts. The gore level is astonishing (watch Spartacus just once!). I can’t justify the costs and I am stuck here for another year because to get the “good deals” you have to go contract.

    4. Bobby
      August 23, 2014 at 8:06 pm

      Fewer viewers, higher prices is the weapon of choice. That’s why ESPN can outbid NBC and CBS for tennis rights, making three of the four majors pay-only. Ratings are dropping and Americans are tuning out of the sport, let along playing it, because the games are not being television on anything but niche channels. There’s a reason futbol’s Barclays Premier League (which has a 5:30 PM British time – 12:30 PM ET game on NBC) outranks Major League Baseball on television, where most contracts are pay television only.

      The controversy in Los Angeles, where CBS’ KCAL-9 lost Dodgers and Lakers rights to Time Warner Cable, which has created new channels not available to the majority of the area, is an example of the problems with pay beating local for television rights.

      The USTA and college football officials claim fewer viewers and more money will be good for their sports, but NASCAR already dictated to NBC in the 2015 contract the championship race must air on network television, as they learned the hard way in 2010 when the title deciders moved to pay television.

      Has anyone ever noticed the NFL has a guaranteed rule that in each of the 32 markets (NY has two teams and GB has two markets), the local team’s road games and sold-out home games must air on a local station — no cable? That means ESPN and the NFL Network must be blacked out, as those games locally are sold via syndication.

      Higher per-subscriber fees are used by pay television to outbid networks for events and pay for premium content in original programming that is raunchier than networks. And yet every time, the awards shows reward the premium raunch.

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