Wednesday October 31, 2018

Is the Cost of a Cable Box Really Too Darn High?

A recent poll found that most Americans think cable is way too expensive, and the monthly fee subscribers pay for a cable box makes up a good chunk of that expense. Prices for those boxes seem to keep going up, even as streaming boxes and other computers get cheaper. David Lazarus of the LA Times was determined to find out why, and he found... almost nothing. And not from a lack of trying. The journalist contacted multiple Spectrum spokesmen, and "went knocking at the door of Arris International, the world's largest supplier of set-top boxes to pay-TV companies." He went to DirectTV, Cox Communications, Comcast, and got a big fat "no comment" from all of them, noting that several U.S. Senators got the same response. Some Wall Street analysts said they have no idea how much the boxes cost to manufacture, but suggest that Arris sells them for $150-$250 each.

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If the FCC was right about the average customer paying $231 a year (as of 2016), that suggests the typical pay-TV company is recouping its investment per box in about a year or less, and all fees paid beyond that point are pure gravy, even allowing for any maintenance expenses. Each analyst I spoke with said box fees aren't a huge source of revenue for pay-TV companies, but they obviously add up. Charter, for example, still has more than 16-million residential customers with set-top boxes, many with multiple boxes. After the Spectrum fee rises within days to $7.50 a month, that will translate to at least $120 million. Monthly. Or at least $1.4 billion a year. Rival Comcast charges $9.95 monthly for a high-definition box. It has about 22-million TV subscribers. It's thus looking at potential revenue of $2.6 billion annually. Yeah, if I ran a pay-TV company, I'd want to keep that to myself as well.