Monday, May 7, 2018

Cord Cutting Is The Obvious Result Of A 70% Spike In Cable TV Prices Since 2000

We've discussed time and time again how, when faced with an evolving video market, the broadcast and cable industry repeatedly decided to double down on bad ideas. While consumers increasingly lamented having to pay $130 per month for a massive channel bundles filled with sub-par content, the industry refused to offer serious a la carte options and then jacked up prices even further. When consumers began to complain about high costs and annoying ads, cable and broadcast executives responded by trying to stuff more ads into every viewing hour by speeding up or editing down programs.
So for anybody paying attention, the fact that cord cutting is expected to set records in 2018 shouldn't be particularly surprising. And it's equally unsurprising that a recent study by Kagan highlights how soaring cable TV prices are contributing to the cord cutting trend. The firm was quick to note how the average cable bill has increased in price by 74% since 2000, even adjusted for inflation. All while the average income saw either tepid growth or remained flat, as this Kagan chart highlights:
The firm noted how prices for multichannel packages have steadily risen from just below $60 a month in 2000 to close to $100 in the peak year of 2016, and that's not including the added costs these companies hide below the line via obnoxious hidden fees. Or the fact that most cable companies now charge you for everything from modem rental to the honor of being able to pay your bill in person or over the phone, resulting in compounded annual gross revenue for cable, satellite and telco pay TV platforms increasing at at a rate of 5.5% every year from 2000 to 2017.
It's only now that streaming has begun to reach critical mass that some cable giants have actually buckled to the call for cheaper, better options (AT&T's DirecTV Now, Dish's Sling TV). But there's still countless cable operators soldiering forth with rate hikes and a refusal to improve historically awful customer service -- as if the traditional cable TV cash cow is going to live forever. Many industry execs still honestly see cord cutting as a trend that will magically end once Millennials come to their senses, which is a painful misreading of the scenario.
Part of this confidence is because they have a fairly obnoxious plan b. Given the cable industry's growing monopoly over broadband, most of these companies will simply counter these losses with even bigger price hikes for broadband. Most of those are going to come in the form of arbitrary and unnecessary usage caps and overage fees. These are just glorified rate hikes on uncompetitive markets, but they have the added benefit of making it more expensive to stream for those looking to escape the stranglehold of their traditional cable provider.
And with the looming death of net neutrality, there will soon be an ocean of new "creative" tricks these companies will use to ensure that you remain tightly constrained inside their own massive media landscapes (be that Comcast NBC Universal, or AT&T Time Warner), and punished should you actually try to wander into greener, cheaper pastures.

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