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Poor. Cable.

6/06/2011 12:01 AM Eastern

At the annual National Cable &
Telecommunications Association extravaganza
in Chicago next week, virtually all of the cable
faithful will have the same thought on their
mind as they attend the sessions and listen to
the keynotes: how can I increase revenue?

For my product. For my company. For myself.

Consistently rising revenue has become an
annual right for big cable operators and programmers,
as consumers continue to shell out
more and more for bundled services.

But there’s a silent and growing demographic
that cable executives seem to ignore at their peril:
people living in poverty.

More than 50 million Americans rely on food
stamps. About 44 million people live below the poverty line.
While average household income has declined in real terms,
the average price for pay TV has risen 29%.

Those are just a few of the sobering facts that Sanford Bernstein’s
Craig Moffett highlights in his recent report, “The
Poverty Problem,” an update of earlier work in the area that
should be required reading for CEOs in distribution and programming.
In it, he tries to answer a fundamental question:
“How much is too much?”

The escalation in pay TV prices, not to mention the vows of
higher fees from retransmission-consent players, leaves you
thinking some companies are “utterly tone deaf” to the dayto-
day lives of 40% of American households, Moffett said. He
believes the pay TV ecosystem is in real trouble because it has
priced itself into irrelevancy for the growing number
of people hanging for life on the bottom rungs
on the socioeconomic ladder.

While most cable operators’ low-end packages
for cable TV are neither cheap nor compelling,
some are making inroads to the low-income market.
Comcast recently unveiled its low-cost broadband
service for families in Chicago,
and one hopes others will follow.

The unemployment rate is still above 9% and
the number of people in the U.S. under the poverty
line is growing due to a stubborn recession.

“After the necessities of food, shelter, transportation
and healthcare each month,” Moffett wrote,
“the bottom 40% of households have already exhausted
all of their disposable income. There is nothing left
for clothing, for debt service … for cable … for for phone.”

Many media companies are already seeing the consequences
of this downward shift, with broadband penetrations
gains slowing and losses in video customers. The real
eye-opener for me is the report’s conclusion that poverty
opens the door to “good enough” alternatives to TV such as
Netflix. Cord cutting becomes not so much a technology phenomenon,
Moffett said, but an economic one.

Despite the negative views in the report, Moffett remained
bullish on cable’s future because of overall bandwidth demand
and low penetration. “It still has a lot of life in front
of it.”
But only if people can afford it.

 

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