In a down economy, TV rules

Consumers are reining in spending, but they're still willing to pay big bucks for cable TV.

By Kim Peterson Aug 27, 2010 3:52PM
Blank TV © Digital Vision Ltd./SuperStockAs the economy teeters, people are cutting back on all kinds of expenses -- except for cable.

Cable bills are actually going up, Bloomberg reports. In the second quarter, people paid about 8% more than the same period a year ago, to an average of $123 a month.

Cable and satellite stocks are enjoying a nice run this year as a result, beating the S&P 500 index by some 15%, Bloomberg reports. Free cash flow is at record highs at companies like Comcast (CMCSA), Time Warner Cable (TWC) and Cablevision (CVC).

One analyst told Bloomberg that cable companies are now focused more on extracting money from existing customers than luring new ones in with deals.

One stay-at-home mother said she's happy to pay more than $200 a month for cable and Internet. It's a bargain, she told Bloomberg, because of how much her family uses the services. Post continues after video:
But what about all this talk of cutting the cable cord? Turns out there aren't many people doing that yet. Although Hulu and Netflix (NFLX) are making headway in persuading some customers to drop cable altogether, it's not a mainstream phenomenon.

But cable prices can't rise forever.

"The consumer's wallet isn't infinitely expandable, so cord-cutting will become a reality," one analyst told Bloomberg. "Cable prices are rising faster than consumers' disposable income. No one can predict exactly when or what the breaking point will be."



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