There’s A Lot Of Money In The Cable TV Business

I was talking to my dad the other day about our cable TV service.  We use the same provider, so we were both dismayed (but not surprised) when we both received a letter in the mail from our cable company letting us know of a rate increase.  This is something that usually comes out around this time of year.  My dad got a note that his service was going up $3 a month, while ours was going up $8 per month.

The letter blamed rate increases from content providers, which is a pretty standard reason that they’ve given the last few notices.

While talking, my dad did a quick set of math that was pretty eye opening.  He did some research and found that our cable company has roughly 800,000 accounts.  A $3 month increase per month is $2.4 million extra charges coming in each month.  Multiply that by twelve to look it over an annual basis, and you’re coming close to $30 million dollars.

That’s just the extra money, and I actually think that’s higher since you figure we were getting an $8 increase.  Even if the average increase was $5 per customer per month, that’s $48 million per year of additional revenue!  Somehow I doubt that the content providers are getting $48 million dollars.  Surely some of that money is staying in house.  Yes, I’m sure they have raises for their employees and that there are costs associated with the infrastructure and such, but still, that’s a pretty good pot of ‘extra’ money to work from!

I took it one step further and started thinking about the total revenue.  Our company is privately held by a venture capital firm, so we have no idea about these numbers, but figure the average bill for services is $100 per month.  That’s $1,200 per year and if you multiply that out by the 820,000 accounts they have, that works out to $984,000,000!

Almost a billion dollars in revenue for a company with less than a million customers.

And our cable company isn’t even one of the BIG companies.  Imagine Comcast, who at one point I read had over 18,000,000 accounts, which works out to be in the tens of billions of dollars from cable and internet services (nearly $22 billion to be exact).

These are just staggering sums of money to me to provide the ability for people to sit down and watch TV, or surf the net, or nowadays, make phone calls.

It makes you realize why they offer specials to lure customers in.  Each of those customers provides a pretty decent chunk of revenue, and if they can escalate the customer to a higher price it becomes a pretty good amount of money, and if you multiply it by the number of customers that these companies have, well, it’s almost obscene.

Playing the discount game

That’s why I think it’s more important than ever to get the best deal that you can.  Simple reason being, these companies are not hurting for money, and they can afford to give you a discount.  Now, get this straight, they can’t afford to give everybody a discount, but that’s the thing.  Not everybody is going to ask.

You are!

So, if you’re paying full price for cable service, it’s time to hop on the phone and get your discount.

Trust me, the cable companies can afford to give you one.  All they hope is that you don’t ask.

Readers, are you getting any discounts on your cable bill or do you jump around providers to get introductory deals as a regular thing? 

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20 thoughts on “There’s A Lot Of Money In The Cable TV Business

  1. Wow, that’s a lot of simoleans. Maybe I’m in the wrong business….

    Doesn’t it stink that you have to jump on the phone to beat the company into giving you a better rate? I don’t know about you, but I hate it. Even when the people are nice on the other end, I can’t stand having to call and find out that there was a rate I COULD HAVE HAD if I’d just continually hounded by cable company. Customer service means nothing to these people…
    Joe Saul-Sehy recently posted..The Power of Big, Fat, Audacious GoalsMy Profile

    • But if you look at it from the perspective of the company (and their shareholders) they have to maximize their revenue and profitability. I hate it as well but it’s just business.

  2. Cable isn’t available where we live, but satellite providers are exactly the same way. I got a letter a couple of weeks ago saying our rate was going up $6 per month. Luckily, I got an offer in the mail from the competition with a much better deal than we currently have. I called up and they matched the deal without any hesitation at all. I wish we could cancel. We rarely go out, so I guess satellite TV is our entertainment, and I’m OK with that. I do like to watch NCAA basketball as much as anyone. So until we’re ready to give it up, I’m calling as much as needed to get a better deal.
    Kim@Eyesonthedollar recently posted..Free Money Finance March Madness, Please Vote!My Profile

    • Hopefully the conversion went well. Did you go back to your original provider once the new one agreed to lower your prices? Often they’ll call your bluff on leaving until you actually provide proof that you can get a better deal, and then sometimes they’ll come back at that point with a match or better deal.

  3. My parents have cable and continue to play the rate-change game. My mom contacts the cable company and gets their latest 6-month promo to keep her rate the same or receive a small discount. They’ve switched between Dish and Xfinity once or twice, but that process is always a huge pain! Given all the work and irritation associated with a subscription that offers hundreds of channels and still nothing to watch, I’m glad my husband and I are sticking to rabbit ears.
    Kendal recently posted..Good Friends and CoffeemakersMy Profile

  4. Wow $8 per month is the same amount for a Netflix membership. Perhaps you should cancel your cable if Netflix could serve your needs. (No, I didn’t get paid to say that, hahaha)
    Mandy @ MoneyMasterMom recently posted..A Parental Temper TantrumMy Profile

    • As of now we watch too many different shows that I know Netflix doesn’t have access to. Plus, you’d still have to pay for high speed internet and to un-bundle probably wouldn’t save as much as some would think

    • I guess when they announce these mega deals that the sports network pay the leagues, the money has to come from somewhere. Now that makes sense!

    • I still find it hard to believe that most people just pay whatever and don’t question it!

  5. This is exactly why I use VUDU for our TV consumption. VUDU has access to almost everything and you only pay for what you want to watch (like buying a season pass of a TV show for $40). VUDU also offers movie rentals too. I did the math and we definitely save money over cable considering there are only a few channels we even watch when we have cable.
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