In the inflation gap between goods and services, one of the biggest chasms is between the price of a television set and the accompanying cable bill. In the past five years, the price of a new TV set is down nearly 58%, while the cable bills have risen nearly 14%.
Her article cites the higher prices being charged by content providers, such as ESPN.
My household is providing a subsidy to cable TV. We don’t watch it, but it comes bundled with our Internet service. When will the cable TV model break, so that it can no longer extract so much revenue? Some possibilities.
1. Never. My household is an outlier. Other households are getting ever-increasing value from cable TV, and they will gladly pay more for it.
2. Never. The business model of bundling is sound when there are high fixed costs, as in wiring up a community.
3. When enough spectrum is freed up that consumers like me start to get rid of cable and rely solely on wireless.
4. When enough consumers shift toward Internet-based entertainment.
To me the most important thing is ensuring that the Cable companies like Comcast are not allowed to purchase the Wireless companies like T-Mobile or Sprint. If that happens they’ll never die.
This is a specific subset of your three, but I cut the cable a long time ago and have never regretted it. (I tell my internet provided that I would not take their TV if it were free) except during football season.
So when live sports are widely available on some internet service, cable and dish companies are dead in less than a year.
My impression, too. Once a handful of sports become readily available online, cable is doomed.
In part the online services are competing the prices down. A good Netflix package is something like $20/month (I don’t remember exactly). They have to push it that low because their customers have a lot of other options they can easily switch to. With cable, it seems the cable company uses their monopoly control of the pipe to drive their rents up.
Yes I have satellite only for the Basketball and Football. In the summer I hardly use it at all.
With the NHL, I buy their online streaming package every year, and it costs (for the year) about what a month of “enough” cable TV to see that much hockey would cost.
The trouble is, if any cable TV channel I could conceivably subscribe to through my local cable company is carrying the game I want to see, it’s blacked out by my IP address and I can’t stream it. There was some kind of class action settlement recently about this but it doesn’t seem to have forbidden the practice.
So saying that “sports streaming” will kill cable is not quite correct. Sports streaming in PARALLEL to cable channels in your area, with no blackouts to ensure cable TV subscriptions, would kill cable TV. As of right now that doesn’t even seem possible because of how incestuous these broadcast/cableTV/ISP/Sportsnetwork relationships are.
I think the consensus view is a variation on 5. The bundling of TV won’t go away, but those bundles will move to internet distribution and the overall number of TV channels will decline. So a Netflix bundle, a sports (or set of sports bundles), HBO bundle, etc. And different households will puchase different sets of bundles. Cable TV through cable providers will then erode and be mostly for older people as markets age them out.
When Hell freezes over and we get a President who instructs the Attorney General to enforce the antitrust laws even against people who control the Megaphone.
Cable companies are delighted with cord cutting. It means they replace 50% margin cable subs with 100% margin internet subs. So don’t think you’re hurting the cable company by “cutting the cord.” You’re hurting the networks but not the actual cable provider.
It seems they could be related. Constantly improving and cheapening TVs mean people get more satisfaction from cable than they used to. In the late 80s my family got cable for the first time, and we had a 19″ color set in one room. Everyone watched the same program or you were watching nothing, and there were 8 of us. Recently a tenant of ours moved out and left holes in the walls where he had mounted flat screen TVs…. in every single room in the house. Living room? Check. Kitchen? Check. Both Bedrooms (two in one)? Check. In the unfinished basement? Check. Only the bathroom didn’t get one- and only two people were living there. In terms of total TV watched and TV viewing experience I am sure that the two of them got more per dollar of cable bill than my family did.
But they also had family programming.
By family programming, do you mean awful shows that were only better than not watching TV at all?
I’ve watched some of these allegedly good shows today. They pretty much suck AND my kids (and my wife and even myself at times) can’t watch them.
Somebody recommended Justified, but again my family couldn’t watch it. And having to hunt down,shows like Tyler Cowen trolls strip malls for undiscovered Thai food dives is amother negative people are confusing for a positive.
I think #4 is underrated.
http://www.wsj.com/article_email/espn-tightens-its-belt-as-pressure-on-it-mounts-1436485852-lMyQjAxMTA1MjEzMDkxMjAwWj
My kids watch youtube videos that they could produce. To them this isn’t weird. To them sports is weird.
The driver of the cost increase is the content. At some point, the owners of the content will have a showdown with Netflix to get their outsize share of the streaming revenue. That’s when Netflix inflation starts to look like cable inflation.