Cable TV Prices for American Consumers Near Tipping Point

Cord-cutting isn’t solely based on price, but it doesn’t help that the average American has had to steadily increase payments for cable TV service for the past 20 years. This has made competing digital streaming services, from providers such as Netflix, and Hulu, all the more attractive—especially since younger viewers are just as comfortable watching shows on phones and tablets as they are watching them on TV.

In its latest report on average rates for cable programming service and equipment, released in October 2016, the Federal Communications Commission (FCC) revealed that the average monthly rate for basic cable service rose by 2.3 percent over the 12 months ending Jan. 1, 2015.

Yet, American cable customers may finally be getting a break. In the report, the FCC indicated that the big cable companies, such as Comcast, Charter Communications and AT&T, may be feeling the pressure from consumers who have other options. Although the FCC did not find that rates went down during the reporting period, it did note signs of a change in the industry that might put an end to rising prices.

On a percentage basis, the 2014 increase is smaller than the average 4.8 percent it has been over the past 10 years, according to 2005-2015 FCC reports. What’s more, customers paying for expanded basic tier service now pay less per channel by 1.8 percent. The cost—$0.46—per the recent report, has fallen an average of 1.4 percent a year since 2005. While this sounds positive for TV viewers, keep in mind that the lower cost reflects the number of channels most people receive—whether they watch those stations or are just forced to buy them in their package deals.

Price increases have at least slowed, as shown by the report. And the trend may continue seeing that, in the nearly two years since the report period ended, pay-TV companies have faced increased competition. The changing market may inspire cable companies to lower prices.

Nevertheless, as the situation currently exists, the pay-TV industry is losing customers, but its prices continue to go up. Yet, according to a new PwC report, the growing popularity for a new generation of high-quality video, along with live TV, is reducing consumers’ price sensitivity. As well, new slimmed down, or “skinny,” offerings from cable TV operators are slowing down cord cutting.

Perhaps this can decelerate the anticipated long-term decline of the pay-TV industry (including cable, satellite and telephone companies), which has kept cable executives on their toes since 2013, when the multichannel TV providers, including cable TV operators, posted their first full-year decline in subscriptions. Any decline in pay-TV subscribers was first detected in second quarter 2010 reports, according to SNL Kagan analyst Ian Olgeirson, as told to the Los Angeles Times.

The April-June quarter tends to be the weakest for the pay-TV industry, as students and families move at the end of the school year, cancelling their subscriptions.

In late August 2016, SNL Kagan reported pay-TV cord-cutting to the tune of 812,000 customers for the second quarter of 2016. Year-over-year numbers were even worse, according to the research firm, with 1.4 million fewer subscribers than in the second quarter of 2015. “It is a bit of an acceleration and the biggest quarterly loss we’ve seen,” said Olgeirson.

None of this is lost on cable operators, which are trying to get ahead of changing consumption patterns. This is AT&T’s aim with its DirecTV program, which it hopes will be its primary TV platform by 2020, according to Bloomberg.

Initiatives like skinny bundles have helped cable TV operators regain some strength in the last two years, but they still experienced a net loss of 298,000 subscribers in the second quarter, the SNL Kagan report found.