By Demitrios Kalogeropoulos
August 4, 2013
Americans are sending bigger checks to their cable companies these days. Both Comcast (NASDAQ: CMCSA ) and Time Warner Cable (NYSE: TWC ) reported last week that they’re collecting more cash from subscribers lately. And while it’s true that big cable is after bigger profits, that’s not the only reason bills are on the rise.
Here’s a look at the trend in average monthly revenue per customer for the two cable giants:
Source: Time Warner and Comcast financial filings.
It’s important to note that these figures include high-speed Internet and phone services in addition to straight-up cable programing. That said, let’s dig in to exactly why the numbers have been spiking.
Higher speeds and more services
First, people are opting to upgrade to higher Internet speeds. While Time Warner’s video revenue rose by just 3% last year, the company’s high-speed data sales leapt by 14%. The same goes for Comcast. It saw high-speed Internet revenue rise by better than 9% over each of the past two years while cable sales crept up by 1.3% and 2.5% in 2011 and 2012, respectively.
Bundling is also doing its part to raise average bills. The number of “triple play” subscribers on Time Warner’s books jumped by 12% last year as it persuaded more folks to subscribe to all three of its major services: voice, data, and cable. With additional services attached to our bills, it’s no wonder we’re paying more in total.
And content is getting more expensive for cable companies, giving them a good reason to raise prices. Time Warner’s programming costs spiked by 6.4% in 2012 thanks to a rise in sports-related broadcasting expenses. Comcast expects its content costs to jump by 10% this year. The culprit? You guessed it: sports programming.
That’s been a boon for the likes of Disney (NYSE: DIS ) , which owns ESPN. Disney reported a sharp rise in affiliate income last quarter that was driven by a 7% bounce in the prices it charges for ESPN. To some extent, cable companies have just been passing those extra costs on to consumers.
But we can’t let Big Cable off scot-free. Increased fees and plain old pricing changes have been a factor in rising cable bills as well. For example, Time Warner credits price increases and “an increase in equipment rental charges” as helping its revenue last quarter. Comcast says “rate adjustments” contributed to boosting sales toward that record $160 monthly figure last quarter.
Overall, both companies managed to book higher total revenue despite losing a small amount of cable subscribers. The loss from those cord-cutters was more than offset by sales gains from other services.