Trying to get your arms around industry trends for cable TV isn’t easy. There are a number of different entities that track various cable statistics and they are often not in synch. This week I saw a new press release from Leichtman Research that said that the average rate increase in cable rates this year has been around 4%.
I keep an eye on these kinds of statistics because most of my clients compete against the bigger cable companies. Leichtman says that the average monthly spending on pay-cable TV is now $103.10, which is 4% higher than 2015. This is an eye opener because household spending on cable increased from $73.63 in 2011, or an average increase since then of 7.7% per year. For the increases to finally drop to 4% is big news.
But like anything in the cable industry, there are a lot of moving parts in trying to see the future trend of cable rates. Consider all of the following, which have some bearing on current average nationwide cable spending:
- There was a press release in January where Comcast said that their average cable bills would go up by 3.9% this year, right in line with this latest report. But in addition to raising cable rates the company also had a $2 increase in its ‘broadcast TV fee’ of $2 which affected every cable customer. All of the big cable companies now have these fees, which are just another piece of the cable rate, but which are not often counted as such. These fees let companies like Comcast hold down their advertised rates which increases overall cable rates.
- Charter and Time Warner seem to have had a much lower annual increase than average due to the merger that was pending during the normal January rate-increase period. But one would have to think that now that the merger is over that these companies will make up lost ground. I’ve seen predictions that Time Warner customers could see a jump in their 2017 bills as large as $10.
- Both satellite companies had one of the largest rate increases we’ve seen from them in years. DirecTV raised package rates from $1 – $9 and DISH Networks raised rates from $2 – $8.
- Cablevision didn’t raise their rates at all at the beginning of the year due to their expected merger with Altice.
- We know that there is a lot of cord-shaving going on, which would have a downward pressure on average cable bills. The large cable companies don’t report customers by size of package, but we have a lot of evidence of cord shaving due to networks like ESPN losing millions of customers since 2015. If the industry is not losing as many customers as ESPN then only cord shaving – people moving to a smaller package – can explain their customer losses. If lots of people buy smaller cable packages the average bill will drop.
- Finally, with the big cable companies it’s getting really hard to distinguish cable increases from other price increases. I’ve seen estimates that most of the large cable companies have around 70% of customers in some kind of a bundle. Most people with bundles don’t know what they pay for any specific component of the bundle. But this also means that the cable companies can be arbitrary when separating the bundles into the component cable, data and telephone revenues. This means the reported ‘cable’ revenues from the big cable companies can be fudged to meet reporting goals or any other purpose.
- In this last year we are starting to see increases in broadband rates from many of the cable companies. For example, Cox just recently increased various data rates from $2 to $7 per month. But for customers in a bundle these revenues fall into the same muddy bundled price along with the cable rates. Do customer in a bundle really care which piece of their bundle increased?
One thing I see external to these big industry statistics is that my smaller clients are not seeing any drop-off in increasing programming and other cable expenses. If anything, because of the continuing big increases in retransmission costs they are seeing as large or larger increases in underlying cable costs as ever. Smaller cable providers will really feel the squeeze if they compete with somebody like Time Warner that barely raised rates in 2015.
While it’s not really good news, it appears that it’s likely that the ‘smaller’ rate increases from the bigger cables for 2015 are probably an anomaly and that these companies will be back to larger increases in 2016. But it’s anybody’s guess going forward if the annual increases are going to be in cable rates, broadband rates or something else. Like everything in our industry it’s getting a little muddier to predict.