April 02, 2014 – Phoenix, AZ - Cable ONE President and CEO Tom Might issued the following statement regarding video programming:
There is a serious problem with the video business model that few want to talk about and no one wants to own. Programming companies, cable and broadcast, are in a race to see who can take the most from a very distressed consumer's pocketbook. Our total programming costs are up 50% in just four years, while total viewing is exactly flat. Unfortunately, this increase must be passed through to our customers, who now have to pay a lot more for their same viewing. But, video subscribers do not have endless discretionary money, particularly in the mid-to-smaller markets like Cable ONE serves. They are starting to make other choices, like accessing their content online or though OTT solutions.
Just six large companies own 90% of the programming sold through cable companies in the United States: Disney/ABC, Fox, Viacom, Turner, NBC/Universal and Discovery and they represent the majority of our 50% increase. Broadcast retransmission demands make up the rest. Their combined feverish competition for "their fair share" of the video pocketbook is now spiraling out of control. Total programming fee growth at Cable ONE has gone from $1 to $2 a year per subscriber to $4 to $5 a year. As a result, an increasing number of lower income consumers are being priced out of the video subscription marketplace each year. MVPD penetration peaked in Q1 2010 - four years ago - and is heading steadily down, even during a five year economic recovery.
To make matters worse, several of these programming groups, including Viacom, have substantially less viewership than they did when we last negotiated, yet they still ask for enormous increases at renewal time. Their only logic is that they want "their fair share." This is leading to a Tragedy of the Commons that no one wants to own and no one can stop.
Meanwhile, technological disruption is also racing through programmer and distributor business models, while this pricing tragedy plays out. The content that cable companies are paying ever more for is now often free out on the internet. Coping simultaneously with spiraling content costs and escalating technologic disruption is something even a company the size of Time Warner Cable could not manage. Is it any wonder that small cable companies, who pay a lot more for programming than Comcast does and who cannot force Netflix to pay a toll like Comcast does, are starting to rethink their video models and might not want to sign six year contracts with 100% rate increases?
About Cable ONE
Serving 730,000 customers in 19 states with high speed Internet, cable television, and telephone service, Cable ONE provides consumers a wide range of the latest products and services, including wireless Internet service, High-Definition programming, and phone service with free, unlimited long distance calling in the continental U.S.
Cable ONE Public Relations Manager