Multichannel Video Providers Might Be in For a Tough Time

Bernstein Research says the cable and satellite industries face a "new normal" of years, perhaps decades, of reduced discretionary consumer spending, compared to the "boom" times that preceded the economic meltdown.

That is going to pose quite a management challenge, since the annual price increases service providers have been able to push through will be much more difficult.

Bernstein Research Senior Analyst Craig Moffett notes that video subscribers have recently declined for the first time in recorded history and said that it was likely more than just the downturn in new housing.

Some think a few more quarters of data will be needed to confirm a possible trend, but if the slowdown does continue, service providers and programmers alike are going to have to rethink their prospects.

Up to this point, programmers have said they need higher fees from distributors to fund the cost of more original programming. Fees paid to sports programmers have been a salient example of the trend, but not the only example.

If distributors cannot raise their prices, there will be new questions about whether the higher fees can be paid to the programmers, and new questions about whether the annual price increases can be counted on to fuel continued distributor revenue growth as well.

That will make the business case for broadband access investment more difficult, as entertainment video has become a significant part of the revenue mix for fiber-rich telco access networks.

To compensate, distributors might have to turn to higher broadband access prices, higher voice prices, or both. You can make your own guesses about what consumers might do if voice or fixed-line broadband access prices rise.

Moffett: Where Will Money Come From For Pay TV Price Increases?