Cable Company Dilemma: 500 Channels and Nobody’s Watching

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The number of TV channels the average American commands through the living room remote control has risen by nearly 50% in the past six years. And now those channels are becoming increasingly available on mobile devices that give us viewing options no one would really have imagined even five years ago.

So what do we do with all these new choices? We watch the same stuff we’ve been watching for the past umpteen years.

According to a report from The Nielsen Co., the average American now receives 189.1 TV channels, a record high and up from 129.3 just six years ago in 2008.

That same average American, however, consistently watches just 17.5 channels today compared with 17.3 channels in 2008. Nielsen says:

This data is significant in that it substantiates the notion that more content does not necessarily equate to more channel consumption. And that means quality is imperative—for both content creators and advertisers. So the best way to reach consumers in a world with myriad options is to be the best option.

This is one big reason why consolidation in the pay TV industry has now reached the big cable operators like Comcast Corp. (NASDAQ: CMCSA) and Time Warner Cable Inc. (NYSE: TWC). Pressure is going to intensify from consumers and lawmakers to allow pay TV customers to subscribe to just the 17 channels they want to watch and not the 483 they don’t care about.

This is not good for the cable companies that know that they will have to charge higher prices for the a la carte subscriptions, threatening their subscriber numbers, their revenues, and their profits. One way to fight that is to get really big, as Comcast-Time Warner want to do and AT&T Inc. (NYSE: T) and DirecTV (NASDAQ: DTV) are believed to be planning to do.

The giant companies will be able to maintain their package pricing structure and still make a profit because they will essentially be the only customers for the content producers programming. And, even if there are two giants, they will have little incentive to compete with one another.

ALSO READ: AT&T, DirecTV Deal Could Challenge Comcast, Time Warner Merger