Supply and demand be damned: Subscriber counts fall, prices still rise

Defying what would seem to be common-sense economics, service providers across the board have instituted annual price increases even as subscribers continue to turn off pay TV and seek alternative sources.

The price increases are a "double-edged sword" for operators seeking some way to recoup increased programming costs but not lose any more subscribers, according to Sanford Bernstein cable analyst Craig Moffett, who detailed the trend in a report called "U.S. Pay TV: Death, Taxes and Cable and Satellite Rate Hikes."

Charter Communications (Nasdaq: CHTR) has taken pains to explain to subscribers why the cost of watching TV is going up faster than their taxes by attaching programming surcharge to bills to reflect higher programming fees.

"We calculate it at the market level and pass it through without taking a margin. We'll recalculate that once a year. We did that in a large part because we want to get away from the traditional annual price increase and that seemed like a logical vehicle to at least deal with the retrans portion of the equation," Ted Schremp, executive vice president and chief marketing officer told Citi's 2011 Global Entertainment, Media and Telecommunications Conference last week, adding that so far there has been limited reaction--positive or negative--to the move.

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