Cord-Cutting

Posted on December 11, 2010

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TV subscription’s price tag has always been a problem for consumers.  The latest trend now is cord-cutting and according to Needham & Co. analyst Laura Martin, there are certain TV channels that should be available online in order for consumers to cut the cord for TV subscription.


Many consumer groups want TV à la carte pay instead of paying for channels they don’t want in order to watch the ones they do want.  It would not be a problem if it weren’t for high cable and satellite TV rates (which increased more than 40% over the past decade, faster than the overall rate of inflation, according to Bureau of Labor Statistics).

It was surprising to find broadcast up in the top considering where their trend was going.  But I was not surprised to find sports junkies dedicated to their ESPN.

The way the cable industry revenues are constructed is the reason behind why it’s not cheap.  According to the Department of Telecommunications at Penn State University, the license fee to carry a network could cost around 25-30 cents per subscriber per month, could be more for some networks.

There are 2 business models: Broadcast is primarily advertising based and their revenues are decreasing, whereas Cable’s business model is based on ads and subscriptions.  Cable has 2 revenue streams and even if channels were sold individually, it would be hard to keep advertisers–forcing cable to raise license fees to make up for revenue loss.

Ultimately, TV cord-cutters have to make the sacrifice, but in turn they’re not giving in to big cable companies.

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