Poverty a problem for pay TV
Study: More people can't afford services
For years, execs at pay TV companies and telcos boasted about their growth as subscribers continued to pay more for new cable services, next-generation smartphones and faster broadband. Amid the euphoria, however, those execs didn't address what might happen to their bottom lines when consumers could no longer swallow those increasingly larger bills.
They may be facing that reality soon. In a foreboding new report, one analyst concludes that a major risk facing companies like Comcast, Time Warner Cable, Verizon and AT&T is not heated competition from each other, or a fast growing outlier like Netflix, but rather poverty. "The poverty problem provides a new and sobering lens for any serious analysis of the telecom and media sectors," concluded Sanford Bernstein analyst Craig Moffett. "At the low end, customers aren't just choosing between one provider and another. They're often choosing between these services and a third meal." His 96-page report, "U.S. Telecommunications and Cable & Satellite: The Poverty Problem," was released Friday and was certain to have ruined the long Memorial Day weekend for at least a few media execs.
To underscore his premise, Moffett offered some data that would make any sales force out pushing subscriptions cringe.
• About two-thirds of American families subsist on less than the average after-tax income of $62,000 a year. "We are, sadly, a country where most Americans are below average," Moffett wrote.
• Fifty million Americans are on food stamps.
• Forty-nine million are considered "food insecure," with no confidence where the next meal is coming from.
• Forty-four million Americans now live below the poverty line.
"The picture of an America where 40% of households are essentially bereft of discretionary spending power has incredibly important implications for companies in our coverage," Moffett wrote.
Average price of a pay TV subscription has risen 29% in the past five years, while real income growth has declined. (...)