Friday, October 28, 2011

Higher Cable Bills Encourage Cord Cutting

Whether it's the appeal of over the top distribution platforms or expensive cable bills, consumers are cutting off their cable bill. Time Warner Cable's quarterly report echos what other cable operators have been seeing a decline in their cable subscription business. At the same time, internet subscription has been rising.

Frankly, part of the problem comes from us as consumers; we have a growing appetite for more. Whether consuming food, cable, or apps, we are not satisfied with what we have; we want even more. And perhaps it is time to go on a diet. Asking for more is not always a problem - more bandwidth, faster internet speeds - sometimes we should just go on a diet.

And perhaps that is what cable operators may have to start to consider doing. Going on a diet with the number of cable networks on the line-up. With the average cable networks' license fees rising 3.5% annually, those costs are being forced on to higher cable bills to consumers. Cable operators are starting to look at ways to either move basic cable networks to higher, separately priced tiers, for consumers to choose to buy or not, or to consider the unthinkable, dropping cable networks. The latter is probably much harder to do but as contract renewals come up, certainly a consideration.

But where to cut? Does a network with a Nielsen rating less than .5 get pulled? Does a Network group get told we are only taking your top 2 or 3 channels? How many movie networks does a channel line-up need, or general entertainment networks, or women's networks, and yes even sports networks. As Networks have grown up they have broadened and spun off niche networks that have broadened and spun off their own niche networks. Perhaps it is time for cable network consolidation.

Certainly cable operators are being faced with the unenviable task of deciding what to do with their cable packages to retain subscribers. In today's economy, cost is clearly a factor. But once we get back to economic prosperity, no doubt gluttony and the desire for more will comeback again. And that being the case, networks and operators could hold out and not make any of these drastic cost cutting moves in the short term.