“Why is my cable bill so high?” is a question you’ve likely asked yourself at one time or another. Maybe the answer to that question led you to ditch cable for some other service — Netflix or Hulu or a so-called “cable-lite” service like Sling TV. Maybe it led you to reduce your order to a smaller package. Or maybe you just grumbled about it and kept paying. (The numbers suggest you’re in this last group.)
One thing’s for certain, however. You could have been paying a lot, lot more.
You aren’t paying for all of your channels — only some of them
The most common misconception about how cable bundling works is that the massive amount of money you pay is for a huge number of channels, many of which you never watch. You are, indeed, getting all of those channels, and if ratings are any indication, you’re ignoring a lot of them. But you’re probably not paying for the ones you’re ignoring.
Instead, what you’re paying for is a handful of big-ticket channels — your ESPNs and FXsand USAs and TNTs and AMCs. The majority of your cable bill is taken up by these top-flight channels. Then there’s a large substratum of channels that are beloved by a smaller number of people, channels that might not be massive draws but grab large niche audiences that really care about what they program. (These are the ones that cable providers occasionally try to drop, only to hear from angered customers — think IFCor TV Land or even something like ABC Family.)
Finally, there’s an even larger level of channels that you pay very little, if anything, for. These channels mostly rerun old content, and they can seem particularly unnecessary in a world with Netflix and Hulu. But corporations are unlikely to give up their space on the cable dial. Indeed, instead of retiring channels, they usually rebrand them, as Fox did when it turned the Fox Soccer Channel into the FX spinoff FXX.
The amount that cable companies pay for subscriptions to these channels — dubbed a “carriage fee” — is closely held within the industry, but research firm SNL Kagan releases numbers that most will admit get pretty close, and the Los Angeles Times earlier this year pegged ESPN (often regarded as charging the highest carriage fees in cable) as costing over $6 per subscriber. That may not seem like much — it’s less than half of what you might pay for HBO — until you realize that ESPN also collects substantial ad revenue, and the vast majority of other entertainment channels are sold for between 10 and 50 cents per subscriber.
So the problem is less one of how many channels you have than how many channels you have with content you actually care about. If you’re only a sports fan and only care about ESPN, having to pay for a bunch of other channels you don’t watch must seem like a poor deal. But if you like to watch, say, American Horror Story, Monday Night Football, The Walking Dead, and Mr. Robot — all from not just different networks, but different corporations entirely — you start to see how the numbers add up.
Cable bundling almost certainly saves customers money in aggregate
So why the massive cable bundle? Why not offer customers à-la-carte channel selection? If you only like to watch Walking Dead and football, why not be able to pay forjust AMC and ESPN?
The simple answer is that the cable bundle, by and large, saves customers money — or so we think. (À-la-carte channel sales have never been tried, about which more in a second.) As you might expect, cable networks want as much money as they can get in terms of carriage fees, while cable providers want to keep those carriage fees as low as possible.
What the cable providers have that individual customers don’t is a warped form of collective bargaining. They speak for lots and lots of customers, whereas individual customers speak only for themselves. For as little as people seem to like their cable providers, it’s easier for Comcast1 (speaking for millions) to hold ESPN at that $6 figure than it would be for you or me to do so as an individual.
The obvious counterpoint here is that if you really do only care about ESPN, you might be happy to pay $15 or $20 or even more just to get ESPN’s channels in an à-la-cartesituation, because you’d still be saving money overall on your cable bill. But it’s not hard to imagine à-la-carte channel selection ending up costing many customers more.
The proof may come out of Canada, of all places. In 2016, the nation will launch its own form of à-la-carte cable, and industry analysts will be able to see if average rates shrink, stay about the same, or climb.
Having a hit show is a massive boon to cable networks
Negotiations around carriage fees have always been tense, but those in the industry readily admit they’ve gotten even tenser in recent years, thanks to the boom in original content on cable in the past decade.
Take, for instance, AMC, which has had high-profile squabbles with cable and satellite providers. If the network still just programmed “American Movie Classics,” it would have next to no leverage in these negotiations. But as the network of Mad Men and Breaking Bad and especially The Walking Dead, it had the weight of millions of fans who needed to see their favorite shows behind it.
The US cable industry is a $48 billion behemoth that props up the entire television industry. Once you start to understand that much of TV has turned into a zero-sum game of trying to grab as much of that pie as possible before the industry irreparably changes, lots of seemingly inexplicable things start to make more and more sense — like, say, AMC’s insistence on having spinoffs for all of its major hits when it originally made its name as a place for original storytelling.
But the foremost thing this explains is why seemingly every network in existence is developing original programming. WGN America programming Salem and Manhattan — both of which draw anemic ratings — isn’t about garnering major success in the short term. It’s about the hopes of finding the network’s very own Walking Dead before the industry collapses. (And if cacophonous Salem and Manhattan fans give the network a tiny bit of leverage with cable providers, well, that’s fine too.)
All of those channels you have are the leftovers from the 1990s cable boom
Still, much of what you pay on your cable bill consists of carriage fees for channels you probably never watch. Yes, there are charges for equipment, infrastructure, and upkeep, but the cost difference between making a cable network accessible to 10 million people and 100 million people is effectively nonexistent. Thus, you’re almost certainly paying for at least one channel you never, ever watch.
So why do you have all of those channels in the first place? The explosion in cable and digital channels in the 1990s and 2000s was based roughly on the idea that the cable model would continue to be the dominant content model going forward. Making more and more specialized channels was worth it, if said specialized channels could find a niche audience that would call their cable company and demand to see that channel.
And in some cases, this worked. Think, for instance, of Turner Classic Movies. It’s not a network with a massive audience, but it’s a network with an enormously devoted audience, one that will be enormously vocal if, say, their cable provider has a falling out with Turner Networks and stops providing those networks for a time. This is the best-case-scenario version of this situation, from the networks’ perspective. A niche channel with a readily definable brand can become an important bargaining chip in the tense negotiations over carriage fees.
But the vast majority of cable and digital channels are just taking up space. Take, for instance, Chiller, which wanted to be a sort of SyFy Channel for horror but has yet to really establish itself. The question for NBC Universal (which owns Chiller) is whether to invest in creating the kind of original programming or intense branding that might grow a dedicated audience of Chiller fans, or simply to let it slide, collect what carriage fees it can, and eventually let it die when industry contraction comes.
All of those channels are a major part of why TV got so good
An offshoot of your massive cable bill is that it ended up paying for the Golden Age of Television. Take, for instance, Sundance’s Rectify, a tremendous television program, watched by very few people, which is only possible in an environment where its parent company (AMC Networks) is being propped up by increased carriage fees.
Most cable TV is produced via a weird kind of capitalistic socialism, wherein really big channels make the majority of the money, but it gets spread across numerous other channels. A show like Rectify exists because it’s found a kind of protected zone in this world. It could only exist on Sundance, and television as a whole is better for its existence.
Of course, that’s cold comfort if you don’t watch or care about Rectify and still have to indirectly pay for its existence. But the reason TV got so good in recent years is thanks to all of the different kinds of stuff out there. You may not care about Rectify, but you might care about Fortitude on Pivot, or Salem on WGN America, or watching Premier League Soccer.
The end of this world is inevitable. The internet and streaming services have increasingly disrupted television business models. Eventually, there will be a contraction. Hopefully there’s a way for that world to crumble while still allowing for the sheer diversity of programming that’s sprung up in recent years.
The easiest way to reduce your cable bill
The nice thing about living right now is that there are more options than ever before to reduce your cable bill. You could cancel it entirely and buy only the shows you want from Amazon or iTunes. You could use a digital antenna to pull in free, local channels. You could bump down to the cheapest package available and supplement with Netflix and Hulu (an option cable companies say lots of their customers are trying).
But the easiest way to reduce your bill is the same as it’s always been: Call your cable company and see if you can catch a break here or there. Many companies offer bare-bones packages that feature a handful of the most popular channels and little else, even if they don’t heavily advertise these packages. Such a package, supplemented with one of the many digital options outlined above, might be perfect for you.