| Price competition is fast road to going out of business. Competing on price is an inexhorable march towards going out of business. Fixed, variable and sunk costs don't go away, no matter what consumers think. Additionally, for-profit businesses are not in the business of operating to break-even; hence the name for-profit.
Just food for thought. |
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mogamer
join:2011-04-20
Royal Oak, MI | said by JimMcCoy:Competing on price is an inexhorable march towards going out of business. Fixed, variable and sunk costs don't go away, no matter what consumers think. Additionally, for-profit businesses are not in the business of operating to break-even; hence the name for-profit.
Just food for thought.
Nobody thinks that costs aren't increasing. But why do these costs go up 2 or 3 times the inflation rate? Because the way the market is set-up, there is little pressure to hold the line on prices. Cave in to the content providers demands (no matter what the increase is) and pass the cost is a model that can't really be sustained. If the content providers know that they can't get automatic increases from the distributers, they would hold the line on costs themselves and their demands would be less and the increases to the consumer would be less. |
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| Costs due to content provider increases aren't all that much.
Certainly it won't explain a $5 increase every year when the channels they are blaming negotiate 3 year contracts with the cable providers.
Cable providers simply want to make more money, period. It pleases their shareholders. The retransmission consent disputes are the PERFECT scapegoat. |
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elray
join:2000-12-16
Santa Monica, CA | reply to mogamer
That's nonsense.
The model works very well, and is quite sustainable.
Just because the choir here whines, doesn't make cord-cutting a reality.
(We are the ONLY household on our entire block that goes without.)
No one is disconnecting their pay-tv. Even at $100+/month, it remains the lowest-common-denominator of cheap, passive entertainment that occupies the idle time of the American household. That isn't going to change. |
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 pnh102Reptiles Are Cuddly And PrettyPremium
join:2002-05-02
Mount Airy, MD | reply to fifty nine
said by fifty nine:Cable providers simply want to make more money, period. It pleases their shareholders. The retransmission consent disputes are the PERFECT scapegoat. I'd say it was. Most of the country has access to at least one cable provider and 2 satellite providers, and a fair chunk of the country, on top of this, has access to at least one phone company-provided TV service, so this is 4 providers for a fair number of people.
It isn't ideal, but it seems that many people do have access to more providers than they did say in the 1980s or 1990s, but prices still go higher? The only logical reason is content providers, which even with any number of TV providers, still have a monopoly over their particular content (that is, you can't watch MTV content on a NewsCorp-owned channel).
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Romney 2012 - Put an adult in charge. |
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| said by pnh102:said by fifty nine:Cable providers simply want to make more money, period. It pleases their shareholders. The retransmission consent disputes are the PERFECT scapegoat. I'd say it was. Most of the country has access to at least one cable provider and 2 satellite providers, and a fair chunk of the country, on top of this, has access to at least one phone company-provided TV service, so this is 4 providers for a fair number of people. It isn't ideal, but it seems that many people do have access to more providers than they did say in the 1980s or 1990s, but prices still go higher? The only logical reason is content providers, which even with any number of TV providers, still have a monopoly over their particular content (that is, you can't watch MTV content on a NewsCorp-owned channel). You do in fact watch other companies' content on other channels. There's no loyalty really. For example, Fox Television studios sells shows to NBC and other networks.
As for prices going up among different providers, let's apply this thinking to a service that doesn't have retransmission fees factored in - internet providers. Why is it that internet providers, particularly wireless ones (that don't have a corresponding TV service) are raising prices by exhorbitant amounts? The answer is that they have to please their shareholders, and that means increasing profit. Increasing profit means raising rates.
I believe that despite competition, there is at least an appearance of collusion among TV providers for existing customers. |
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| reply to JimMcCoy
Lets be honest, for all the dressing these are simple commodities. Other than the pipe type you have internet, phone, and cable. Maybe there is some small differentiation for Vod, apps but not enough to justify a large delta.
In a commodity environment, margins usually hover around 10-15%, whereas the cable boys are in MSFT high 35%+ which is unsustainable.
So these guys are keeping their stock prices up on repurchases and dividends which are unsustainable if you look at their debt to equity ratios. Considering TWC just did a $400m stock repurchase and shares outstanding remained relative constant, that means some serious options were handed out. |
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| reply to fifty nine
said by fifty nine:Costs due to content provider increases aren't all that much.
Certainly it won't explain a $5 increase every year when the channels they are blaming negotiate 3 year contracts with the cable providers.
Actually, the increases are that much, especially the cost of sports programming, and can account for a $5 rate increase.
The behavior of customers can actually help to increase the carriage fees for channels as they threaten and harass their TV provider to give into the demands of the channel owner in order to keep certain channel in the lineup. |
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| reply to fifty nine
said by fifty nine:The answer is that they have to please their shareholders, and that means increasing profit. Increasing profit means raising rates.
Profits and a certain return on investments is and always will be a concern for a publicly traded company. If the stockholders are not receiving the desired return on their investment, they will take their money elsewhere. There is nothing new about that. |
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