Cable Prices Keep Rising; Customers Keep Paying

Slashdot It! Americans discouraged by higher gas prices and airline fares may decide to spend more vacation time at home, perhaps watching television. But that, too, will cost them more than ever. Cable prices have risen 77 percent since 1996, roughly double the rate of inflation, the Bureau of Labor Statistics reported this month. Cable customers, who typically pay at least $60 a month, watch only a fraction of what they pay for — on average, a mere 13 percent of the 118 channels available to them. And the number of subscribers keeps growing. The resiliency of cable is all the more remarkable because the Internet was supposed to change all things digital. Technology has led to more choices and lower prices for news and music as well as cellphone and landline minutes — not to mention computers, cameras, music players and phones themselves. Yet here is a rare instance where Silicon Valley has failed to break a traditional media juggernaut. And not for lack of trying. Technology companies keep insisting they will provide new low-cost ways to get video into the home, but so far their efforts have created more black boxes to stash under the TV, not real competition for cable that could bring prices down. “A couple of years ago, there was a thesis that we were at the twilight of Comcast as the gatekeeper,” said Craig Moffett, a cable industry analyst at Sanford C. Bernstein & Company. “That thesis still titillates some. But technologically and economically, it’s probably not going to happen.” So why hasn’t technology had a bigger impact? One answer is the alliance between cable companies and Hollywood producers of content to sell channels in bundles, rather than letting consumers pay only for the channels they want. The producers of cable television content share $15 billion to $20 billion a year in fees from cable subscribers, roughly equal to the $20 billion they receive in advertising revenue, Mr. Moffett said. Without those fees, the cable companies say, prices would go up. “If each channel depended on individual consumers electing to pay individually for it, this would slash potential viewership and seriously hurt the ability of most channels to attract their current level of advertising dollars,” said Jenni Moyer, a spokeswoman for Comcast. “Lost ad revenue would have to be replaced by higher license fees.” The industry says the digital era has brought its customers better image quality, more on-demand services and solid value through packages that combine cable, phone and Internet service. It also says consumers are actually getting more viewing value for their dollar, at least relative to inflation. The National Cable & Telecommunications Association says that from 1998 to 2006, the price consumers paid for each viewing hour was essentially flat. The chief economist of the Federal Communications Commission, Gregory S. Crawford, disagrees, saying the industry is not factoring in the real cost of the programming that subscribers are watching. By his analysis, the increase has been around 50 percent from 1997 to 2005. The F.C.C. and some politicians have been in a pitched battled with the cable industry, trying to get it voluntarily to offer so-called à la carte pricing. But cable companies insist that this is not economically feasible. Kevin J. Martin, chairman of the F.C.C., said in an interview that since 1996, when Congress increased competition in telecommunications, prices have dropped for many other services. “We’ve seen the opposite occur in the cable industry,” he said. “The dramatic increases in pricing we’ve seen are one of the most troubling issues from a consumer point of view.” In 2007, average monthly revenue for each Cablevision subscriber was $75, up from $65 in 2005, according to SNL Kagan, a research company. At Time Warner it was $64, up from $54.50. The cable industry has never felt the pricing pressures the music industry is feeling. The most obvious reason is that Internet speeds have not been fast enough to permit easy downloading of movies and other video material. That is changing, though. People are viewing millions of videos online each month — albeit mostly short video clips, and not Hollywood movies. At the same time, the use of file-sharing tools like BitTorrent to download illegally popular movies and television shows is growing. Get Daily Updates via Email Protect your computer with Windows Onecare