The following is an excerpt from our paper “Understanding TV Pricing & How To Save Money.” If you would like to read the entire paper, please email us at [email protected].
Did you know that your current TV provider doesn’t actually want to sell you TV programming? That’s right, they don’t want to sell you TV programming because it is not very profitable for them. We know that this seems ludicrous but it is true. Take a look at the chart by the Kagen group, one of the leading analysis firms specializing in the television industry.
As you can see in the chart above, the profit margins on video have been in decline for a long time. But how can this be? If your TV prices have gone up every year, how is it possible for these companies to actually be making less profit per user on TV every year? That is the trillion dollar question.
Of course, we don’t want you to feel bad for these companies…their customer service has been awful and their services are prone to strange blackouts, but we think a little understanding will go a long way. These companies are raising your rates because of the rising cost of buying the programs from the people who create them. So, if you want to be angry at raising rates, then blame should first be laid at the feet of the content creators.
Who are the content creators you should be mad at? Here is a good list:
- Time Warner
- News Corporation
This list of companies produces most of the shows you watch via broadcast and cable networks. These enormous media conglomerates charge more and more every year for their content and many smaller cable and satellite providers are often stuck in the middle. Your TV signal provider knows that you, the end customer, will not tolerate even larger rate hikes to cover the full cost of rising programming costs. Of course, it is no surprise that two of the largest cable companies and the largest satellite companies (Comcast, Time Warner and AT&T’s DirecTV) are also in the TV show creation business. Its more profitable if you make and sell the content yourself.
Since Disney is at the top of the list, you may be feeling bad for getting mad at Mickey Mouse for raising your TV bills every year. But make no mistake about it…Mickey Mouse does not like to lose money. He needs to keep Minnie in pearls. To understand the influence that Micky Mouse has on your cable prices, take a look at all these channels owned by Disney:
- Disney Channel
- Fox Sports
- Nat Geo
- History Channel
Have you ever wondered why you can’t just subscribe to individual channels? The list above should give you a clear picture about how the industry works. Disney will rarely put a TV package together that does not contain all of these channels. And even if you don’t want all of these channels, you still need to pay for the ones you don’t watch.
For example, let’s say that you never watch sports, therefore ESPN is useless to you. However, if you want to watch Nat Geo or the History Channel, you will almost always be paying for ESPN. And guess what…ESPN is the single most expensive cable channel out there! Nearly $8 of your monthly bill goes straight into Mickey’s pockets. Now let’s do the math on that:
84 million houses paying $8 per month to Disney / ESPN = $672M per month. That is about $8 billion per year.
Keep in mind, this isn’t profit for Disney. They still need to pay the actors and producers and musicians and the NCAA for the rights to broadcast college football. It ain’t cheap to make high quality shows…but maybe it shouldn’t be quite so expensive.