Originally published: July 15, 2012
Last updated: July 15, 2012 - 7:37pm
Channel blackouts such as the one that resulted from the recent spat between Viacom and DirecTV have become far more common over the past three years. Consumers can thank the changing dynamics of the entertainment industry.
Media companies such as Viacom and Disney have become steadily more profitable since the gloom of the recession lifted in early 2010. But the cable and satellite providers that pay to carry their channels have seen profitability virtually stagnate as they fight each other for subscribers. The squeeze has prompted distributors such as Dish and DirecTV to revolt against higher programming costs. Consumers are left in the crossfire. The rising number of disputes is largely the result of the stagnant market for pay television. Simply put, there aren't many new households being formed in the sluggish economy, and those who want to pay for TV already do. Some 101 million American households subscribe to cable or satellite service. That's about 87% of homes, a proportion that has remained unchanged since 2009, according to Leichtman Research Group, which studies media and entertainment. TV distributors pay media companies a few cents per channel per subscriber each month. In turn, they try to sell packages of channels for more. As costs for those channels rise, so do monthly service bills, but not always by enough to offset the increasing fees cable and satellite providers are paying to media companies. In addition, distributors spend money on special promotions to woo subscribers from competitors. As a result, some companies' expenses are rising faster than revenue. That has prompted cable and satellite service providers to fight back against cost increases, even when it means blacking out channels until they can eke out a better deal.
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