Friday, June 5, 2009

Cable is good business ... for now

According to Saul Hansell's recent blog in the NY Times, the cable companies are doing better than ever.

Revenue at both Time Warner and Comcast rose 5 percent, a growth rate that many companies would kill for in these lean times. Their various measures of operating income and cash flow rose a bit faster than revenue because they’ve been able to keep a handle on costs.
But there's trouble on the horizon. ESPN demands $3 per subscriber and Comcast has to pay NFL Networks 40-45 cents per subscriber--all year long. As more niche cable sports networks come online, expect sports packages to cut into those cables profits.

Comcast has fought back by offering sports tiers, for an additional fee, of course, but in general cable companies are loath to offer a la carte services. Most consumers only watch a handful of the channels available in their bundled packages, and to let consumers pick and choose their favorites would cut into revenues.

The other thing that is going to cut into cable company revenue, amusingly enough, is one of their products, the Internet. Already, tech savvy people are letting go of their expensive cable packages in favor of services like Hulu or just watching series episodes on network Web sites.

The trouble is that right now, getting the technology to work seemlessly requires networking skils that are far beyond the powers of ordinary man or woman, as this NPR All Tech blogger found out.

What will drive people to learn how to harness the technology is costs. The average cable bill has doubled in the past 10 years and we haven't gotten a whole lot more for our money beyond HDTV, though I will admit many living rooms are brighter with HDTV.

What may make cable companies increase their offerings is increased competition. As TechCrunch's Michael Arrington notes, search engine competition has forced better products out of Google.

Having moved twice in the past 10 months, I've dealt with three separate companies. Two of the towns I have lived in had competing cable companies and, not surprisingly, in those towns each of the competitors offered more channels for less money than the town without competition. In short, the residents of those towns were better served by competition.

For everyone else, especially in densely populated areas, help may be on the way.

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