Time Warner Cable subscribers, brace for rate hikes
Prices for most of the firm’s TV services are set to rise. The move comes as it cuts a deal for a baseball channel and as the cable industry loses subscribers.
David Lazarus
January 29, 2013
The latest rate hikes also come amid ongoing losses in the number of TV subscribers — as opposed to, say, high-speed Internet customers — throughout the cable industry. Cable companies are thus squeezing more money from fewer TV viewers.Just as Time Warner Cable has cut a deal with the Los Angeles Dodgers for a new baseball channel, which could add $5 to customers’ bills regardless of whether they watch the channel, the company is jacking up rates for nearly all its other TV services.
“These are outrageous increases,” said Jamie Court, president of Consumer Watchdog, a Santa Monica advocacy group. “Cable and satellite companies get away with raising rates because they know that customers have nowhere else to turn.”
But that could change. At some point, possibly soon, the cable and the satellite industries will go a rate hike too far, prompting even more customers to pull the plug and turn instead to online services such as Netflix.
Time Warner subscribers are being notified in their latest bill that the monthly cost of basic cable service will jump 8.2%, or almost four times the annual rate of inflation as of October 2012 — to $72.50 from $67.
The cost of receiving local channels will climb 17.6%, to $20 from $17 a month.
Like to skip commercials by recording shows on your digital video recorder? That monthly cost will rise for many customers 18.6%, to $12.99 from $10.95.
If you have other services, such as Internet, you can expect your monthly cable programming cost to rise $3 to $5 after existing promotional rates expire, Time Warner says.
“As is evident from recent media coverage, our industry has seen programming costs increase in double digits,” said Milinda Martin, a Time Warner spokeswoman. “Time Warner Cable has worked hard to keep our costs down and provide a wide range of choices for customers, and we have added new channels, on-demand content and HD offerings to our lineup.”
It’s tempting to conclude that Time Warner is padding its pockets in light of its hugely expensive deal to create SportsNet LA, a Dodgers-centric channel expected to be up and running by next year and costing Time Warner $7 billion to $8 billion.
Time Warner already has cut a similar deal with the Los Angeles Lakers for a basketball channel dubbed Time Warner Cable SportsNet.
The cable giant charges other cable and satellite companies about $4 a month to carry the Lakers channel. The added cost is typically passed along to customers of those companies.
Analysts expect the added cost to cable and satellite viewers for the Dodgers channel will be in the vicinity of $5 a month.
“This is about a corporate buying spree and Time Warner taking it out on the backs of customers,“ Court said.
While that may indeed be an element of the latest rate hikes, Time Warner is by no means alone in reaching deeper into customers’ pockets.
Rival Comcast raised rates for its California customers, mainly in the Bay Area, an average of 4.3% last year. Bryan Byrd, a company spokesman, said rates are scheduled to go up again this summer because of “increased programming and operating costs.”
On the satellite front, Robert Mercer, a DirecTV spokesman, said the average customer’s bill will rise about 4.5% beginning Feb. 7.
“The new pricing reflects the significant increase in the cost of programming and of course the investments we make to enhance our customer’s viewing experience,” he said.
John Hall, a spokesman for Dish Network, said the cost of core programming packages rose $5 as of Jan. 17 “to account for significant increases in programming costs.”
The cable and satellite companies are right about higher programming costs. Companies like Disney and Fox insist that distributors pay millions of dollars for fat packages of channels, regardless of whether viewers want them.
Time Warner customers, for example, are estimated to pay about $5 a month for Disney’s ESPN sports channels, even though they might not ever watch them. They pay for Spanish-language stations even if they don’t speak the language.
At the same time, cable providers have seen a steady exodus of TV subscribers as online alternatives such as Netflix and Hulu increasingly provide more programming options.
The nine biggest cable companies nationwide lost about 420,000 video subscribers in the third quarter of last year, according to Leichtman Research Group. Some of these folks made their way to satellite companies, which added 48,000 subscribers over the three-month period.
That means Time Warner and other cable companies are asking fewer TV customers to carry an ever greater share of their costs. This can’t go on indefinitely.
The answer is clearly to allow cable and satellite subscribers to pay only for the channels they want. As it stands, the industry is hostage to the whims of channel providers, which have no incentive to change things.
The average TV viewer regularly watches about 17 channels, according to ratings company Nielsen. So-called a la carte pricing is the solution.
As I’ve written before, cable and satellite companies should apply their considerable lobbying clout to persuading lawmakers that it’s not in consumers’ interest to have to pay for products they don’t need or desire.
Otherwise, the way things are going, there won’t be enough customers left to support the pay-TV industry. And that’s not in anyone’s interest.