For those who are unfamiliar, the phrase “cord cutting” refers to consumers switching from traditional pay-TV broadcasters like cable and satellite, to streaming services like Netflix or Hulu. This trend has been around for years, but shows no signs of dying out. So is that a concern for cable and satellite companies? Or are those big broadcasters simply too big to fail?
The reality is that cable and satellite companies, while not going away anytime soon, are certainly no longer in their heyday. In an effort to not only stay relevant, but also to keep profits high enough to please their investors, major broadcasting companies are launching their own streaming services (think Dish AirTV) and raising their prices.
Recent announcements have made it clear that pay-TV giants Comcast, AT&T and DISH Network all plan to raise their rates in 2019. Raising rates is risky. On the one hand, these companies need to cover the increasing costs that they pay to carry network like CBS, ABC and regional sports. Sports are truly the last bastion for traditional pay-TV broadcasters, and those who own sports broadcasting rights know it. As those costs go up, so to the costs that are passed on to consumers.
The gamble here is clear: raise the rates to cover your costs and remain profitable, but risk alienating subscribers, who may already feel that they are paying too much. Fortunately, the price hikes are not significant at this time. DISH said that they’re raising their English packages by $3 to $5 a month while DirecTV is raising their rates by $3 to $8. While those increases are not a lot, if they continue to rise every year consumers will eventually say “enough is enough”.
A Comcast spokeswoman spoke with Fortune about these rate changes, saying that “the changes were necessary because of rising broadcast television and sports programming costs, ‘which are the largest drivers of price increases,’”.
The way people consume media is changing. Satellite and Cable providers are still around, but their business strategies are going to have to pivot if they want to continue to stay relevant. Simply raising rates every year is not a sustainable solution.