Comcast CEO Says “You Can’t Keep Raising The Price Forever,” But Does It Anyway

What’s a $145 billion cable company to do when it keeps losing pay-TV subscribers? Judging by Comcast’s recent actions, the answer would be “raise prices,” but the company’s CEO admits that this isn’t exactly a tenable business model… except he’s not talking about cable TV rates.

No, when Comcast CEO Brian “My Dad Gave Me The Company” Roberts said yesterday that “You can’t keep raising the price forever,” he was referring to the content providers who sell their bundles of channels to Comcast and other pay-TV companies.

The cable networks often try to force cable companies to buy a whole slate of channels — many of them smaller, niche offerings — in order to get the rights to carry the one or two most popular channels. This is why there are countless ESPNs and enough Nickelodeons to fill up a school bus.

Of course, Comcast’s own NBCUniversal division is just as guilty of this behavior as the others. We’ve all heard of NBCU’s USA Network, E!, and Bravo, but when was the last time you heard any watercooler talk about Cloo or Chiller? [NOTE: This question does not apply to employees of those two channels, though we have a hunch even they have a hard time remembering where to find them in their local cable listings.]

As the cost of these bundles has gone up, Comcast has been sure to pass the added expense on to its shrinking pay-TV customer base and its growing number of broadband subscribers who may now be subsidizing cable channels they don’t even have access to.

Earlier this week, the Albuquerque Journal noted that Comcast’s Internet prices are going up 4.5% in that market. The hike is even more dramatic (7.6%) for customers who subscribe to Internet and pay-TV service from Comcast. Nationwide, a company rep says Comcast’s prices are going up an average of 3.4%.

“We continue making investments in our network and technology to give customers more for their money, including more video across platforms, better experiences like X1 and faster Internet service,” the rep explained to the Journal. “We periodically need to adjust prices due to increases we incur in programming, business costs and new technology.”

This statement and the nationwide price hike reveal the depressing truth that Comcast’s recent decision to upgrade some customers’ broadband speeds for “free” was really just “free until the next price increase.”

At the same time, Comcast is continuing to expand its test of data caps as a revenue source. The company recently began offering an “Unlimited” option for customers who live in markets where 300GB monthly caps are being tested. For an additional $30/month, subscribers can avoid being hit with overage fees, though in some cases it would be less expensive to pay the overage than it would to pay for the Unlimited option.

This is effectively a way of charging customers more for using the same amount of data — in spite of the fact that Comcast’s broadband customer base is growing and the costs associated with delivering data to end-users is decreasing.

Comcast may now be the #2 pay-TV provider in the country behind the combined audience of DirecTV and AT&T U-Verse, but it certainly has the leverage to try to break up these pricey bundles of cable channels.

But as indicated above, it also has a bit of a conflict of interest because those NBCU bundles that it foists on other pay-TV providers brought in more than $9.5 billion for Comcast in 2014. And while Comcast is griping about paying more to carry other channels, last year it saw a 4.6% increase in revenue from distribution of its cable networks.

Verizon is currently involved in a legal battle over its attempt to shake up the cable bundle system. Earlier this year, it announced so-called “Skinny Bundles,” where FiOS subscribers only have to pay for a small core number of channels and then buy additional bundles of 10-15 channels (usually grouped together in a common theme).

By not including ESPN — the most expensive single basic cable channel for pay-TV companies to carry, at around $6/month — in the required core stations, Verizon wakened the beast that is the legal team of ESPN parent company Disney. They claim Verizon is violating its contract by not making all subscribers get the sports network, but Verizon maintains that it’s done nothing wrong.

For more:
Comcast raises prices just as CEO says “you can’t raise the price forever” [Ars Technica]
Comcast CEO: ‘You Can’t Keep Raising Prices Forever’ []

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