Your Cable Bill Has Increased 188% Since the Mid-'90s -- Here's Why
It's not you. Even if you haven't added new content packages over the past few years your cable bill is likely much higher than it used to be. A recent article in The Atlantic shows American's expanded basic cable bill price has jumped 188% since 1995 .
So, what's the deal?
The biggest culprit is America's love affair with sports. But add to that the monthly content fees Time Warner Cable and Comcast pay content makers like Disney's ESPN, and you've got a recipe for higher monthly bills -- with no end in sight.
Sports are king
Recently the NBA signed a multiyear deal with ESPN and Time Warner's TNT worth $24 billion for those channels to broadcast basketball games between the 2016 and 2024-2025 seasons.
Right now TNT and ESPN pay an average of $930 million per year to broadcast the games, but under the new deal they'll pay $2.6 billion every year.
It's this type of broadcast deal that eventually trickles down to your bill every month. Why? Because the cost of live sports has been in the rise, growing about 19% each year, and that's increased the cost cable companies pay for channels like ESPN, which they then pass on to you.
Cable's trickle down effect
We all know no one watches all the cable channels they have, but did you know that out of the average 190, you're only watching about 17 of them? No, the cable company's not giving you the extra 172.5 channels for free, each comes at hefty premium.
Let's start with the ESPN channel, since it's such a big contributor the rise of cable prices. Cable companies will pay ESPN about $6.04 per month, per subscriber. So every time they sign up a new customer, they start paying the worldwide leader in sports this fee, every month.
But this happens for each channel, not just ESPN. The Wall Street Journal says FOX News collects $0.99 per month, the NFL Network gets $1.22 and the Disney Channel gets $1.21.
Obviously this content is expensive to make, so it's not going to come cheap. But the problem is that between now and 2018, the wholesale cost of these channels will go up by 36%.
Clearly a 36% bump in your cable price over the next nearly three years would be very noticeable. So to help spread out the costs, cable companies bundle Internet and phone services, which have higher margins, to the cable services.
But that will still result in about a 12% increase in your cable bill by 2018, on top of the monumental increase it's already experienced over past two decades.
You may want to get used to it
Last month the U.S. Senate voted on the Satellite Television Access and Viewer Rights Act (STAVRA), which allows people who can't receive local channels via antenna in rural areas receive them through satellite providers. The interesting part missing from the bill was a previous amendment that would have allowed satellite providers to sell a la carte channels to subscribers. For example, if you just wanted HGTV, ESPN, and AMC you could pay for just those channels -- at least in theory.
But that part of the bill axed. Which means there's no end in sight when it comes to increasing cable bills. With cable companies and content producers benefiting from TV channel bundling -- and the government not willing to do much about it right now -- it's likely the average price of cable will creep up.
Time Warner benefits from bundling channels together because it sells content channels in addition to its cable services. Time Warner's TNT is the second most expensive channel on cable after ESPN, and its TBS channel makes the top 10 list for most expensive as well.
One glimmer of hope
This week HBO (which is owned by Time Warner) said it's launching a stand-alone streaming service next year. While HBO's been public about this possibility for a little while now, it's the first move of its kind for a content channel so closely tied to the cable industry. There aren't many details about HBO's new streaming service just yet, but it could be a way for Time Warner to use the popularity of HBO's shows to dip its toe in the water of unbundled television.
Last year -- for the first time ever -- the amount of cable subscriber declined. With the cord-cutting trend taking off, this might be HBO's way of gaining subscribers that would never consider a cable service, or those that are finally fed up with the rising costs. But even if the HBO experiment goes well, don't expect other channels to follow suit just yet.
Your cable company is scared, but you can get rich
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The article Your Cable Bill Has Increased 188% Since the Mid-'90s -- Here's Why originally appeared on Fool.com.Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple and Walt Disney. The Motley Fool owns shares of Apple and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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