What average subscription television consumers doesn’t realize is just how much they are paying for channels they do not use. While the cable television providers have been playing the scapegoat of subscribers for years, the real villains in this story are the content providers. ESPN, NBC, and all the other big time content providers have been pressing and pushing the cable companies by increasing rates and forcing them to put channels on the basic package that the cable companies would rather avoid.
All of these channels get paid by the cable subscription services on a per-subscriber basis. This means that even though a consumer never watches Comedy Central they still pay 22 cents for the option to watch them. This doesn’t happen by magic. The content providers force the subscription services to take extra channels. Do you want just ESPN? Well then, you are going to pay almost as much as if you take ESPN, ESPN 2, ESPNU, and the SECN bundled together. Now ABC gets more exposure to their sports networks and can charge more for advertising.
How this affects the market
So what happens is that the average consumer has been seeing these ever increasing subscriber television prices and never knowing why it was happening. When Fox News raised their price from 50 cents per subscriber to $1 per subscriber, Comcast had to raise their rates. Fox News didn’t get blamed for the increase by the consumer, Comcast did.
So for as long as we have had subscriber television all these channels have been raising rates and then not having any backlash of consumer complaints. Instead, the consumer now hates all the big cable subscription companies. What no one outside the industry realizes is that the cable companies do not care for the television service because they are making almost no money on it these days. Their money is made on providing internet access.
The change that has started
What has recently started is the ability for people to cut the cord and get away from subscribing for cable. This means all the cable channels now are not receiving their per subscriber fee for each person who has a channel as part of their bundle.
So far 3.5 million households have cut off subscription television and moved to streaming or just using antennae. If you look at the four top ESPN channels (ESPN, ESPN2, ESPNU, and SEC Network) that translates into a loss of over $270 billion a year. If you think it is hurting ESPN then think about channels like MSNBC, which has low viewership and cannot charge nearly as much for its advertising.
The End Result
While we cannot be certain of how this will affect every channel, what we can know is that there will be fewer channels available to us in the future. Millennials are the most online-oriented consumers to date, and they subscribe to cable at an alarmingly low rate. So as the boomers pass on, and the Millennials and Generation Z take their place in the market, we will see a drastic change in how we view content and how subscription television is delivered to our devices.
