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Cable Prices Are Too Damn High, Or Not
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What’s going on over at Bernstein Research? On Monday Bernstein analyst Craig Moffett put out a report saying programming costs for cable and satellite providers had reach unsustainable levels and there’s no way further increases could be passed on to subscribers without a general revolt:
For years we’ve argued that… online video won’t overtake the traditional linear model any time soon. But we also recognize that soaring programming costs are the best counter argument to the stability of the status quo. At 10% per year, the $40 wholesale cost of goods sold today would more than double, to about $80, in another seven years. Incidentally, the monthly retail ARPU of Pay TV service today is about $80. This is a train wreck in the making. Again, something’s gotta give.
The rise in per-subscriber costs has been particularly steep since the beginning of 2010, according to Moffett, in part because subscriber growth has gone flat as consumers find other ways to get TV content while carriage and retransmission fees have continued to increase.
On Friday, however, another Bernstein analyst, Todd Juenger, offered a very different take, arguing in a new report that pay-TV prices are perfectly reasonable, adding for good measure that practice of offering channels in bundled program tiers that force some consumers to pay for content they don’t watch is actually quite fair because, even if you’re paying for something you don’t want others are helping to subsidize what you do watch.
The proportionality has been overblown, at least to those of us who make a living studying the economics of the industry, because the focus of the discussion has been centered on the rising cost of sports rights and affiliate fees, as opposed to the rising price to consumers of pay TV.
Compared to prices for other goods and services, the rate of inflation in pay-TV prices is far from out of line, according to Juenger.
Wonder what the office parties are like over there.
