Subscribe
JPMorgan Chase reports average cable rates reached $88.67 in 2013. (Image: The Oregonian)
Cable TV rates are too low and need to be hiked to boost revenue and offset rising programming costs, even if rate increases further alienate cable subscribers, according to a new report from JPMorgan Chase.
The Wall Street bank concluded customers have few options, noting that after providers raised prices around 5% last year, they lost only 0.1% of subscribers.
“Cable operators are better off raising video prices than eating higher content costs,” said Philip Cusick, a JPMorgan analyst, in the report. “Our analysis indicates that cable companies are better off raising prices and catching customers with broadband if cord cutting becomes widespread, (rather) than eating the programming increase.”
The bank recommends imposing (or raising) broadcast TV and sports programming surcharges as well as general rate hikes on basic cable service.
JPMorgan notes that increased broadband pricing and cable modem rental fees paid off for the industry during the fourth quarter of 2013, when earnings topped estimates. By doing the same for cable television packages, providers can continue to boost revenue with little risk customers will find a suitable competitor that isn’t also increasing prices.
Even if customers get rid of cable television, a practice known as cord-cutting, cable operators can still keep customers by providing broadband service. Some of the lost revenue can be recovered from the services customers have not canceled.
Cusick says the industry is being challenged by a handful of content companies that increasingly dominate the cable package, among them Walt Disney, Time Warner (Entertainment), CBS, and FOX.
“With the majority of content controlled by only six or seven programmers, aggregate prices for content are rising around 10% annually and forecasts in many media models continue that rise for years,” Cusick said.
I will go with Verizon FiOS for TV, Internet and homephone if it was available in my area. I do not like cable slow speeds.
Not likely, as Verizon is not expanding. Further, cord-cutting may not work out too well on Verizon, as they do not deliver those high speeds for many streaming services (such as Netflix).
We cut the cord on the cable companies and used DSL Extreme for our broadband, which uses Verizon or AT&T lines, depending on your area. We got the 3Mb DSL ($32/mo) and can stream DVD quality netflix into our primary home theater room and the kid can still stream his Netflix cartoons in the other room at the same time. Works great. You don’t need uber-speed broadband for Netflix if you are willing to live without the HD streams – I’ve streamed Netflix with as little as 1Mb DSL and it looks ok. We use an OTA antenna for FREE… Read more »
“We use an OTA antenna for FREE HDTV (21 channels total, 120 if you like religious/infomercial/homeshoppingclub/foreign channels)”
You get 120 OTA channels?
Thats amazing.
Yup, you should have seen my face the first time I ran a scan on the TV and it hit the hundreds. That is, until I started going through the channels and realized most of them were garbage. We are in the Houston area, and the channel lineup here is really good for OTA. We even have a dedicated Country video/music channel (ZUUS) and several movie channels, an HGTV clone (Live Well Network) and a few other channels of interest. The only sports we are interested in is Football, and last year we got to watch all the Texan’s games… Read more »
We have HDTV in our home and because we allow HD 720p picture quality, that is why we needed faster internet speeds like FiOS Quantum 75/35 or 150/65 if they were available in our area because they are crazy fast than cable. We have more than 12 devices connected to our home WiFi so we need more speed and stronger WiFi. Our broadband is more like a pizza pie, if more people eat our pizza, no one who wants to have a pizza slice will be able to have it. These days, having slow 6-10 mbps internet is not a… Read more »
We have 3 HDTVs in our home. We also have 4 IP cameras, and HTPC, Desktop PC, 2 laptops, a Wii, Playstation3, 3 Rokus, 2 Tablets and 2 Smartphones. Everything is connected to the “slow” 3Mb DSL and everything works great. 3Mb internet may be slow by todays standards, but it still allows you stream (Netflix) DVD quality video in one room and “basic” quality in a second room at the same time while surfing the net on a pair of tablets or laptops. The idea that you need FIOS level broadband speeds is only applicable if you cannot ween… Read more »
Why should anyone have to “ween” themselves off any basic utility or restrict usage due to artificial limits?
That’s like telling someone on a farm prior to the rural electrification act that they’re lucky to have power for one light bulb in their home for their kids to do school work under, enjoy the evening, and that they’re lucky to have that and don’t ‘need’ to have power and light in every room.
It may not be for everyone, but when you have to operate as a consumer in a monopoly you can either be a sheep and stay with the herd, do what you are told, pay the price. Or, you can think outside the box and “ween” yourself off of luxuries they think you will not be able to resist. Choice is yours. Baaaaa.