Dollar & Sense in 2010

As we enter a new decade and continue to deal with a troubled economy, it’s a good time to get a feel for how Americans view spending. Particularly when you consider that we’re also embarking on the latest round of video price increases. AT&T U-Verse and Time Warner Cable are raising prices in the range of about 7%, while Comcast, DirecTV and Cablevision are raising prices 3-5%.

 

As we begin 2010, just under half of Americans (49%) say they are spending more money now that they did 10 years ago, according to a new Financial Times/Harris Poll. 43% of adults 64 and under in the US are optimistic about the new decade (ahead of 41% in Spain and 37% in Germany). Still, Americans aren’t all wearing rose-colored glasses. Only 39% surveyed said they expect their standard of living to be better in the next 10 years.

 

Against this backdrop, all the major video distributors are proceeding with annual video price increases. “This year’s increases appear to be roughly in-line with those of prior years’, notwithstanding the fact that the average consumer is inarguably in worse financial condition,” noted Sanford Bernstein’s Craig Moffett. “Indeed, 2010 price increases seem to target the low end of the video market more onerously than the high end, perhaps in anticipation of higher broadcast TV costs (i.e. retrans), which comprise a disproportionate share of low-end packages.”

 

Perhaps most notable, according to Moffett, is that distributors are hiking the price of broadband. Price increases there have not been the norm. All of the pay TV providers in Bernstein’s coverage except Cablevision are increasing broadband prices in some form. (For the record, 2010 marks the 7th consecutive year that Cablevision has raised prices for HSD or VoIP).

 

“In light of the combined price increases being taken in video and broadband, it is quite likely that cable operators will, at the very least, be economically better-off in 2010 than they were in 2009, and even if reported video margins are lower, total margins may be due for a positive surprise (particularly if we see a rebound in high margin advertising revenues in 2010),” Moffett said in a research note.

 

Whether consumers will be better-off, remains to be seen…