Moffett: Where Will Money Come From For Pay TV Price Increases?
Cable, Satellite Face Years Of Reduced Discretionary Consumer Spending
John Eggerton -- Multichannel News, 9/10/2010 1:48:04 PM
Bernstein Research says the cable and satellite industries face a "new normal" of years, perhaps decades, of reduced discretionary consumer spending--at least compared to the boom times that preceded the economic meltdown. That could make price increases for cable and satellite service problematic.
In a weekend report, senior analyst Craig Moffett pointed to the recent finding that pay subs had declined for the first time in recorded history and said that it was likely more than just the downturn in new housing.
"Perhaps the most consistent theme in our research over the past two years has been the widening disconnect between flat-to-declining consumer disposable income, particularly in the bottom two quintiles of household income, and the rising price of media and telecommunications services," he wrote.
Moffett indicated that the price of programming and retransmission-consent have helped boost the cost of expanded basic to $60 "at a time when the average family in the bottom quintile spends just $50 per month on all media."
Spending on traditional cable and satellite service --not including Internet access and phone -- has grown from 0.5% of all discretionary income 25 years ago to 1.4% today. But with incomes falling, savings rates rising and necessities "crowding out" discretionary items, "where exactly will the money come from?" he asked, but did not answer.
"The media industry is "intractably addicted to price increases," he argued. He said efforts, like Time Warner Cable's, to create smaller, less expensive, packages makes sense, but that economic models are based on ubiquity of channels.
"Does anyone doubt that investors would react negatively if it were perceived that cable and satellite's ability to push through price increases were called into question?" he asked.
But isn't that just the question Moffett's memo is raising? "More or less, yes," he said.
"But it is not a stock call that says go out and sell your cable stocks tomorrow or buy or sell media stocks or anything like that. It is saying this is probably something you should be thinking about. If you are a serious student of history, you ought to be thinking pretty hard about the fact that, for the first time in 25 years incomes are stagnant and savings rates are rising and the available pool of funds is shrinking materially," he told Multchannel News.
-
Cut the cable almost two years ago. Get 28 crystal clear channels free over the air with an old rooftop antenna, 15 of them in Hi Def, and 7 of them commercial free.
Have never looked back.
Bob C. - 9/11/2010 1:45:10 PM EDT -
Having retired nearly a decade ago and being on a fixed income, I can relate to this.
When our township continued to raised taxes each year, we had to cancel the services that took care of our lawn. Then we cancelled our land-line phone. Then our cable TV. Every price increase comes at a cost when revenue is limited.
I assume that the folks making the decisions to raise prices in this extended recession make over $100K - putting them in the top 6% of revenue earners. For the 94% that constitute the bulk of their customers, a dollar added to one discretionary pile pulls it from another.
Mace Moneta - 9/10/2010 2:55:25 PM EDT
No related content found.
VIEW ALL GALLERIES
