Cable's Response To Surging Streaming Competition? More Price Hikes

Failures

from the unhealthy-markets dept

We’ve noted for years how when the cable and broadcast industry is faced with new challenges, its very first reaction is almost always to double down on dumb ideas. When consumers began complaining about the volume of ads during prime time, the industry’s first response was to try and edit down or speed up programs so they could shovel more ads into every viewing hour. When consumers began using new DVR ad-skipping tech, the industry’s first reaction was to sue companies offering such advancements.

In a healthy market, companies respond to the rise in new competition by competing on service quality and price. Not the cable industry. Despite a soaring variety of new, cheaper streaming options, every year the industry’s first impulse has been to raise cable TV prices, in turn driving more users than ever to “cut the cord” and embrace these streaming options instead. As a new year rolls in, its a phenomenon that’s once again repeating itself as Comcast, Dish, AT&T, and most other pay TV providers once again raise rates for 2019:

“Giants including Comcast, Dish, and DirecTV plan to raise rates again in the new year, a move that could boost revenue but risks alienating subscribers who have been ditching their traditional TV subscriptions in record numbers. Cable and satellite providers are hoping to squeeze more money from consumers who remain loyal to their packages with hundreds of channels, Philip Cusick, a JPMorgan Chase analyst, said in a note this week, even though “this strategy could accelerate video sub declines.”

While most cable operators will place the blame for these higher rates exclusively on the shoulders of broadcasters, that’s not really always true. Yes, much of the unsustainable rate hikes you’ll see in cable TV are due to programmers constantly wanting more money for the same content. That, however, ignores that most cable operators contribute to the rate-hike festivities by also socking consumers with a universe of higher rates for things like DVR and cable box rental, not to mention the universe of fees, many of which are completely made up with no tether to any real-world cost.

So why does a company like Comcast continue to raise rates on traditional cable TV, knowing this is just driving more users to cut the cord? For one, while streaming video is increasingly popular, most TV watchers (around 90 million Americans) still subscribe to traditional TV, making these rate hikes a quick, all-too-tempting source of up front cash they’ve grown used to. Many cable executives still believe that cord cutting is a temporary storm they’ll be able to weather without having to make too many concessions (like lowering rates or improving historically terrible customer support).

Companies like Comcast also have an ace in the hole when it comes to weathering this particular storm: their growing monopoly over broadband. While users may be able to quit Comcast cable TV, it’s statistically unlikely they’ll have the choice of another broadband provider, especially at speeds over 25 Mbps. As a result, Comcast leverages that monopoly by imposing all manner of unnecessary usage limits should you stream video from competitors, a lovely bit of leverage Comcast will only exploit more fully should net neutrality not be restored.

As a result, the normal response to more competition (actually trying harder) is replaced by a sort of stoic indifference by cable giants, who know their broadband monopolies (not to mention current control over FCC policy in the Trump era) will protect them from having to actually adapt anytime soon.

Filed Under: cable, competition, cord cutting, price hikes, streaming, tv
Companies: comcast, directv, dish