Welcome to 2016, Here's Your Price Increase

The headline on Karl Bode's story in TechDirt really grabbed me: "The Cable Industry's Response To A Banner Year For Cord Cutting? Massive Across The Board Price Increases For 2016" which goes on to decry the stupidity of cable TV executives.

I'm not sure that's the story here. I have worked in the cable TV industry for many years and, by and large, my experience has been that the cable companies are run by pretty sharp people.

So, why, given "rampant cord-cutting" would a cable company "pour gasoline on the fire" by raising prices?

The logical reason would be that it is better business. Multichannel penetration peaked in 2010 at 88% of US TV households. This figure was up from 82% in 2005 because many people who previously used an antenna to watch TV found cable a more attractive solution than buying a new TV or a converter box to deal with the digital TV transition.

Americans certainly love television, but is there any reason on God's green earth why 88% of them would be unsatisfied with the over-the-air broadcast offerings and feel compelled to spend hundreds of dollars per year on additional television? The broadcast channels have most of the top-viewed shows and are available for free in the overwhelming majority of homes (they are not available for free in rural and mountainous Arkansas, Oregon, and Pennsylvania, where the cable TV industry was founded).

If you don't know who this is, you are probably not a young person (click here for the answer)

It is abundantly clear to anyone in the television business that multichannel penetration will continue to decline as it gets more expensive. There will be more and better content on YouTube (itself now 10 years old) each year, particularly for young people who don't hear their voices represented much on television. Netflix and Amazon have created a lot of attractive original programming. That may continue or it may go the way of Yahoo's original programming. It is unclear to me how much money there will be to support how much TV. FX CEO Jon Landgraf said last year that "there is simply too much television"; he may be right.

However, what do you do if a whole lot of people have been buying your service even though it probably didn't make a ton of sense for them to do so and there are more decent cheap alternatives available to them in the "boredom killing business"? It would seem rational to write off these customers and reposition your service as a premium offering. Maybe you would roll out something like Time Warner Cable's Signature Home. Or to put it more into cable programming, maybe you would pursue the strategy Rachel Menken put forward on Mad Men.