Why Do Cable Companies Exist?

You may have read my earlier posts about Cutting the Cord.  In January 2011, I cancelled my cable subscription.  I was paying $80 a month to watch a bunch of television that was almost all available for free online.  By streaming that content through Roku boxes and my Xbox 360, I am now saving $80 a month.

But…there’s a few sticking points for me.  I no longer have access to Discovery Channel and the History Channel.  They both have some great shows that I enjoy.  I can catch earlier episodes of Pawn Stars, MythBusters, etc. on Netflix streaming, but keeping up with the newest episodes is a no-go.  It’s just not possible without paying the cable company.

So I thought I’d look into what portion of your cable bill those channels comprise.  And I discovered an interesting website:  http://www.howcableshouldbe.com/.  It breaks down the fees (per month) that the content providers like the Discovery Channel receive from the cable companies for each subscriber.  Here’s a quick summary of the channels can’t get:

  • Discovery Channel – $0.70
  • History Channel – $0.60
  • Comedy Central – $0.60

Yes, you read that right.  Less than $1 each!  So, I understand why the cable companies require me to buy ALL of the channels.  They wouldn’t make any money without it.  But why don’t the channels themselves offer individual subscriptions?  I’d happily pay $2-$3/month for each of these channels.  That would triple or quadruple their income, and I’d still feel like I’m getting an absolute bargain!

That gets me back to my article’s title.  Why do cable companies exist?  Is it because they own the wires?  Is it because there isn’t a more convenient delivery mechanism?  Why are the channels willing to live with meager fees per customer when they could sell their content to consumers directly for a significantly higher price?

Here’s a great video illustration about what cable companies are doing, and why it isn’t in the best interest of consumers whatsoever.  Try selling magazines the way cable companies sell television.

4 thoughts on “Why Do Cable Companies Exist?

  1. I’m not entirely sure, but I’d have to think there’s some semi-exclusivity garbage clause in the contracts between content creators and providers. That’s the only reason I can think of to explain why someone like the History Channel, or (more importantly to me for cord cutting) Fox Sports Ohio doesn’t offer their own subscription to stream their content live for a few bucks a month. Hell, you said $2-$3, but I’d gladly pay $5-$10 just for FSO if I got HD quality streaming.

    I guess the only other thing I can imagine is a belief that they wouldn’t get a return on the investment if they build this infrastructure. If they believe that, they are blindingly daft.
    If you build it, they will come.

  2. Also, yes, Cable companies exist because it’s their wires. That’s just about it.

    Now, I’m not the type to normally promote the idea of tyrannical seizure of private assets, but I don’t think I’d be against the government declaring that broadband access is a necessary infrastructure everyone should have access to, followed by either buying/seizing the lines from the providers, or building their own.

    More and more, the internet access is going to be vital to citizens in order to be a part of society at large. A lack of access will definite someone as a second-class citizen even more than it does today. Second to things like food, shelter, and health, what else would be more impactful on a person’s daily life and future success?

  3. More and more, the internet access is going to be vital to citizens in order to be a part of society at large. A lack of access will definite someone as a second-class citizen even more than it does today. Second to things like food, shelter, and health, what else would be more impactful on a person’s daily life and future success?

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