You can blame the cable company if you want and they’re not completely blameless. But a recent study by the FCC has shown that retransmission fees have gone up a whopping 63% in the last year for which data was available. That’s where your dollars are going.
Retransmission fees are the fees paid by cable and satellite providers so they can legally charge you for the channels they provide. At one time, cable and satellite companies carried broadcast channels for free and paid only a tiny amount to “basic cable” type companies. In exchange, those channels showed commercials, and could charge advertisers higher rates because more people saw the commercials.
And then, everything changed. Cable companies developed “insertion” technologies that let them replace the original commercials with ones the cable company sold. This meant content providers couldn’t charge more. And, of course, with the coming of DVRs people spent less time watching commercials anyway. Because broadcasts are copyrighted, it’s possible that the whole scheme was illegal, but instead of suing each other, content providers and pay TV companies found a solution.
In order to make up for lost revenue, broadcasters started charging “retransmission” fees, which essentially boil down to, “You pay me for my signal and I won’t sue you for illegally modifying it.” It seemed like a system that worked for everyone. Unfortunately starting around 2010, broadcasters got greedy. Most new contract negotiations started with a 200-300 percent increase in retransmission fees, and let’s be honest, that would be ridiculous even if ratings were the same. Ratings for most channels have gone down in the intervening years largely due to streaming, yet retransmission fees keep going up.
So folks, let me put this plainly. If you’re wondering why your cable bill is so high, it’s because the cable company is battling massive cost increases. Sure, they also try to charge you too much in other fees sometimes, but they’re continuing to take these massive fee increases and find a way to absorb part of them. Cable companies know they charge too much. Conventional wisdom says people don’t want to pay more than $100 for basic cable, and industry-wide average revenues are getting very close to that. People choose to cut the cord or go to “skinny bundles,” choosing their entertainment carefully in an effort to strike back at high prices.
I’ve said this tons of times before. TV networks are pricing themselves out of business. People don’t care about networks, they care about shows. They’re increasingly tuning out of channels that show the same stuff over and over and tuning in to innovative programming like Breaking Bad and Mr. Robot. The truth is that thanks to the culture of lazy programming that pervades broadcast networks, most of us won’t even notice when they start fading away. Yet the same companies that carpet bomb us with episodes of House Hunters and How It’s Made (seriously, I have looked and you can watch about 70 hours a week of those two) have the audacity to charge more for their product. Lawyers negotiate but in the end there’s always some sort of increase, even if the quality of the programming goes down. And that, friends, is why cable bills go up.
The big problem with this whole thing is that we’re not all 100% ready to cut the cord. If every pay TV viewer went 100% streaming and antenna, the internet lines in most neighborhoods would overload and no one would have anything. I think we all agree that cord cutting is the future, and that internet-delivered video is a much better model, but the infrastructure just isn’t there yet. If we want to avoid a complete catastrophe, we need to find a way to rein in this content provider greed. If not, it will sink us all.