Pay TV Operators Raise 2011 Prices Despite Recent Subscriber Losses

An analyst calls the hikes 'a doubled-edged sword,' but says they are 'generally more measured than in 2010,' with Dish being the main exception.

NEW YORK - After two consecutive quarters of multi-channel TV subscriber declines driven by cable losses, pay TV operators have once again announced price increases for 2011, but they are "generally more measured than in 2010," according to a report from Sanford C. Bernstein analyst Craig Moffett.

Moffett said most average price increases announced to-date are in the low to mid single percentage range, with "only Dish Network and Time Warner Cable taking larger increases than last year."

In his report that analyzed pricing changes that can vary based on geography and which video service packages a consumer pays for, he highlighted that the pay TV industry has over the years enjoyed more pricing power than others.

"Higher prices are self-evidently a boon to margins and are necessary to offset upward pressure on programming costs," Moffett said. "Years of price increases, however, have made price increases a doubled-edged sword. Total pay TV subscriptions have declined in each of the past two quarters. The evidence suggests that this decline owes more to problems of affordability than of the more celebrated threat from cord cutting" due to cheaper Web alternatives.

On the high end of increases for 2011, Dish Network's hikes average out to 11 percent for the new year, by far the largest of all companies he covers, Moffett said.

The company, however, didn't increase prices in 2010 and has long catered to more price-conscious customers, with its service remaining cheaper than others. Plus, Dish has promised a subsequent two-year price freeze following this year, highlighting that the increases amount to about 3 percent this year when averaged out over that extended period.

"Dish has, in essence, taken three years of increase at a single stroke," explained Moffett. "We find the strategy to be a curious one, as it maximizes risk of sticker shock (and therefore churn) at a time when the economy is likely at its weakest, and leaves Dish without the flexibility to reflect cost increases in pricing thereafter."

Dish emphasized though that it will continue to offer the lowest prices.

Cablevision is taking the smallest 2011 price increase at 3 percent, with DirecTV and AT&T's U-verse boosting prices about 4 percent each on average. Telecom firm Verizon has not yet announced any pricing changes for its FiOS TV service for 2011, according to the analyst.

Moffett said that data for TW Cable and Comcast is based on small samples, making broad-based conclusions about nationwide pricing trends less reliable.

Among cable firms that he follows, Time Warner Cable is the most aggressive though based on the limited data with price increases in the 7 percent range, Moffett said.
Cable giant Comcast is boosting prices in the 4 percent range, but Moffett said he only had a particularly small sample available in the company's case. "Comcast, in particular, has moved rolling price increases throughout the calendar year, and may also be avoiding significant price announcements while they await approval for their acquisition of NBC Universal," Moffett said.