Cable's Business Model: Fewer Customers, Higher Prices

Written by PTC | Published August 19, 2014

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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