My monthly cable bill arrived with a notice tucked inside it that said Rate Adjustment Notice. My local cable company–one of the few that is run by a municipality–is raising their rates. It is the first time in four years and the letter opens by reminding us they are an integral part of our city. Meanwhile as satellite dishes pop up all over the city and Internet streaming brings more content then before, the rates will be going up seven percent come September. Thus if you get what is called the Expanded Basic (channels 2-99 with cable news and sports) the cost will go up to $66.89.
As is usual when you get these notices, they point out their rates are not out of line but that due to rising costs they have to make an adjustment. Here is how to read such notices: High price cable channels like ESPN get high fees per subscriber so we have to pass those costs to you. You are subsidizing channels that make little profit from advertising (think MSNBC)but rake in those per subscriber fees to keep them afloat. As more evidence that people are moving away from cable company offerings, getting this kind of jolt in the mail will probably convince many to reduce their cable subscription and get most of their news and entertainment online.
I did that a long time ago when I reduced my cable subscription to limited basic (local broadcast channels). I have an indoor antenna that allows me to see all the local channels in hd (and a lot of those sub channels not in the cable subscription). Alas my apartment will not allow a antenna on the roof (and satellite while cheaper than cable has contracts you have to sign)so limited basic is a back up when things go haywire. Fortunately the rate increase does not hit the limited subscription. Why? Simple since just about all the local channels do not charge a retransmit fee for cable use. In order to be seen on cable, broadcast channels have to periodically consent to it. And they usually grant it because it works out well for them. Sadly though some channel owners are starting to demand fees from cable companies to retransmit. One channel in my area did just that and was dropped for a few years. They dropped the fee and now are back on.
The squeeze to force high rates on cable only channels and then to demand fees for carrying broadcast channels means consumers are being hit both ways. They are being forced to subsidize cable channels they do not watch. And to watch local broadcast channels with national programming means fees as well. So cable bills start going up to reflect this reality. And will get worse as more people cut back on cable. Cable is getting desperate in trying to stop this bleeding by offering their own Internet streaming options. The cable bundle death watch has begun.
DSL Reports reported on its blog the following: “Cord cutting is accelerating with the pay TV industry losing 566,000 subscribers last quarter alone. With DirecTV alone losing 133,000 subscribers last quarter, MoffettNathanson notes it was the worst second quarter net loss in history for the nation’s legacy TV industry. The 566,000 subscriber loss comes on the heels of a 321,000 subscriber net loss the quarter before.” And it is predicted to get much worse as the number of pay-tv households is shrinking. Consumers no longer see the value in cable television they once did. Some have called the concept of bundled cable television a great swindle because cable subscribers are forced to subsidize a whole lot of channels they do not watch or do not want to watch. It is great for the cable channel owners because they have a guaranteed revenue stream from cable subscribers. Not any more. Which is why Netflix and Amazon (along with others) are getting more customers. When ESPN, one of the priciest channels on cable per subscriber, starts feeling people no longer watching you know they are getting worried in the corporate suites. They can try to compete for viewers the old fashioned way by earning them but cable tv is not used to that. Broadcast tv has to do that which is why its numbers are higher than cable channels. If Lifetime, Food or SyFy actually have to compete on the open market for viewers, will they be able to do so? We may find that out in a few years.