Commentary

Cord-Cutting Means Cord-Shifting, TV Prices Will Still Rise

Cord-cutting is really about “cord-shifting.” What is the end result? A shift to higher consumer pricing.

Selling new virtual pay TV services have -- up until now -- sounded like a great deal for consumers, priced around $40 a month versus the $100 a month or so for traditional pay TV providers. But that won’t last.

Craig Moffett, media analyst of MoffettNathanson Research, says the cost to produce big TV shows and movies isn’t going down. And TV-wise, the number of premium-scripted TV shows keeps climbing -- now around 500.

As a separate worry, there is no time to watch everything. No matter. Someone will pay. If you don’t buy into this, just look at TV traditional viewing and new digital viewing. Yes, TV viewing is down. But adding in digital premium viewing? That just brings this back to even.

Major TV and media distributors need to make money. Right now, Moffett estimates YouTube TV and DirecTV Now -- two big services -- cost Google and AT&T, their owners, respectively, around $40 a month per subscriber. But it is being sold to consumers at $40 a month. Add in marketing and other operational costs means they are all losing money.

Those services, run by two major media companies -- Google and AT&T -- might stay at this pricing level in the near-term. But not forever. Finding ways to cut carriage costs for TV networks is only a dream. Premium TV shows are still a big deal for TV/movie studio owners. Few are going to discount their prized assets.

The overall term, says Moffett, among all types of media companies -- traditional and new digital companies -- is to form a limited number of “closed TV” systems, which maintain content exclusivity. Netflix already has one. Others like Walt Disney are looking to do the same, as is Comcast Corp.

When that happens, will consumers feel the pinch?

Here’s some related TV history: S&P Global Market Intelligence says customers' cable and satellite TV bills have soared 53% since 2007 to an average $100.98 in 2017. So for the next 10 years, we'll have that to look forward to.

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