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Why Your Cable Bill Is Going Up Again in 2015 -- Sports

January 8, 2015 By Gerry Smith

Time Warner Cable Inc. (TWC) and other pay-TV providers are citing a culprit for the higher bills you’re paying: Sports.

For the first time, Time Warner Cable is adding a $2.75 monthly charge for sports programming. Cablevision Systems Corp. (CVC)’s bills first carried a specific fee for sports and broadcast channels in 2013, and that charge is rising by $1, to $6 a month. Subscribers to satellite-TV and phone companies’ TV services won’t escape the hikes either.

Sports is the most expensive programming because it draws large audiences to live events. For example, Walt Disney Co.’s ESPN and ABC and Time Warner Inc.’s TNT are paying $24 billion over nine years to carry National Basketball Association games. Those costs get passed along to distributors, such as cable companies, and then subscribers. Rising bills are already trying consumers’ patience, and now there are more alternatives than ever for customers ready to ditch traditional TV.

“At some point consumers will say ‘Enough is enough,’” when it comes to rising TV bills, said Dan Rayburn, a media analyst at Frost & Sullivan.

While cable providers say they are offering more services and channels than ever before, many consumers don’t want to pay for networks they don’t want to watch. The latest rate increases could prompt some to cancel their subscriptions, Rayburn said.

And if they do, there are more options than ever for Web-based viewing. Cheaper services like Netflix Inc. (NFLX) have millions of subscribers. Even ESPN’s coveted sports content is going to be available live over the Internet, thanks to a new $20-a-month package of 12 streaming channels from Dish Network Corp. (DISH) That’s far cheaper than the typical basic cable package.

For consumers, rising cable bills have become the norm. The average cost of expanded basic cable service has increased an average of 6.1 percent annually since 1995, outpacing the rate of inflation, according to a May report by the U.S. Federal Communications Commission. Monthly bills are $64 on average, the report showed.

DirecTV bills will increase on average 5.7 percent starting next month, or about $6 on the average monthly bill of $107. Dish customers will pay between $2 to $5 more per month beginning in February.

For AT&T’s U-verse TV service, there will be an increase of $3 to $5 per month, depending on one’s package, to cover a higher fee for the TV receiver and a broadcast TV surcharge. A spokesman for Verizon said FiOS bills will rise in 2015, but declined to say when or by how much.

Comcast Corp. (CMCSA)’s more than 22 million customers aren’t avoiding the higher prices either. The charge on monthly bills for broadcast networks are going up to $3.25 from $1.50 in most markets.

Cable, satellite and phone companies say they are raising rates because they are paying more to carry broadcast networks like CBS and Fox -- which carry must-watch live events, sports and hit shows -- and for sports programming like ESPN. Sports have been able to fetch higher and higher fees because they are ratings gold -- regularly drawing among the largest live TV audiences.

Pay-TV providers last year paid ESPN about $6 each month per subscriber, up from $4.77 in 2011, according to the media research firm SNL Kagan. By 2018, that cost is projected to rise to more than $8 per subscriber.

The amount that Time Warner Cable pays local broadcast channels has risen 60 percent in the past two years, while its costs for carrying sports networks have risen 91 percent since 2008, according to Time Warner Cable spokesman Bobby Amirshahi.

“The rising cost of sports programming isn’t new, but it’s escalating dramatically, and we think that it’s important to show customers the impact of these rising costs through a specific item on their bills,” Amirshahi said in an e-mail.

Cablevision, in a statement, said that their rate increases are “only a fraction of the rising costs of sports and other programming.”

The attempt to be more transparent by adding a sports programming fee may not console customers who are concerned that they are paying higher rates, said Amy Yong, a media analyst with Macquarie Group Ltd.

“They’re trying to figure out a way for consumers to digest rising bills,” Yong said. “However you slice it, at the end of the day you’re just raising prices.”

Perception about monthly bills matters even more right now as Comcast tries to win regulatory approval for its $45.2 billion purchase of Time Warner Cable. The combination of the country’s two largest cable companies, as well as AT&T’s $48.5 billion acquisition of DirecTV (DTV), have drawn heat from opponents who say the deals will lead to higher prices, fewer choices for consumers and worse customer service.

“Anytime that you see prices continually going up, there’s something that’s wrong with the market,” said John Bergmayer, senior staff attorney at policy group Public Knowledge, which opposes the Comcast merger. “You’re only able to get away with this sort of nickel and diming in a market that is not as competitive as you would like.”

At the same time, cable and satellite subscriptions have peaked as consumers find more options for watching TV online. In 2013, the number of Americans who pay for traditional TV fell for the first time.

Time Warner’s HBO plans to offer a standalone, Internet-based version of the premium channel this year, and CBS Corp.’s Showtime Networks is following suit. Sony Corp. plans to offer Internet-based TV service, PlayStation Vue, in the first quarter of this year, complete with channels such as USA, FX and MTV.

With new options emerging, traditional pay-TV companies may be more at risk of losing customers over price, said Rayburn.

“The biggest threat to the cable industry is not cord cutting or streaming, it’s themselves,” he said. “If they continue to raise rates like clockwork, they’re the biggest threat to their business.”

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