Image Source: Flickr userDonkeyHotey.
When it comes to hated industries, there's probably no better poster child than the pay-TV industry. Faulted for years for rate increases above and beyond the cost of inflation, a lack of consumer-focused programming options amid sprawling package plans, and outright hostile customer service, these companies are considered the epitome of anti-consumer businesses.
Continue Reading Below
Last year, the American Consumer Satisfaction Index found subscription TV service finished next to last in 40-plus surveyed industries, with only Internet service providers finishing worse. By the way, most pay-TV companies provide both services.
This year, however, subscription TV fell to a rating of 63, tying ISPs, which held firm. While many other industries have not yet been surveyed, it's likely that subscription TV again will finish among the bottom this year.
Recently, Senators Ed Markey (D-MA) and Richard Blumenthal (D-CT) have faulted multichannel video programming distributors, or MVPDs, for what they claim is a "$20 billion" annual market in renting set-top boxes. Now, presidential candidate Bernie Sanders (I-VT) has joined the fight, being one of eight senators to sign a letter to the FCC chairman.
Set-top box fees you have a choiceThe issue these senators have is with set-top box fees, which average nearly $90 per box per year. While it sounds rather unimportant, those fees can quickly add up. Earlier this year, the Federal Communications Commission released a report from an advisory committee discussing how to encourage marketplace competition for these devices.
By encouraging competition -- whether it be by requiring MVPDs to disclose the option that subscribers can buy set-top boxes instead of leasing them, to notify users that there are third-party options for set-top boxes, or to create a delivery option without the boxes -- these senators hope to drive down the fees of this $20 billion annual industry.
For the operators that would theoretically get hurt the most by a more competitive rental marketplace, it's a little more difficult than simply looking at subscriber counts. For example, perhaps the one hardest hit will be Dish Network , as its nearly 14 million subscribers pay at least $1.26 billion annually in set-top box fees, using the senators' $90/box figures, or nearly 8.5% of its total revenue haul.
Comcast would be inoculated somewhat Interestingly enough, subscriber market-share leader Comcast may be able to brace for any hit. Its massive 22.3 million video-subscriber base pays at least $2.0 billion annually using the $90/year figure -- and presumably more than that considering many households have multiple set-top boxes. As such, you'd expect the company would be in the worst shape if these fees were threatened. However, considering Comcast is an entertainment conglomerate with NBCUniversal's host of programming and even theme parks, the company is more diversified.
For example, the $2 billion set-top box revenue estimates would be just part of full-year revenue estimates of $74 billion. Interestingly enough, the same factors that prevented the company from buying Time Warner Cable -- most notably its sprawling content and ISP operations -- would protect the company against losses if the senators' plans come to fruition.
Smart politics? Perhaps. But how successful will it be?Whether this is construed as Sanders standing up for consumers, or pandering for votes, depends on which side of the political fence you sit on. However, it's most likely smart politics. As earlier stated, many potential voters have a certain level of antipathy for MVPDs, and voters who are fundamentally against regulation on any level aren't voting for Sanders anyway.
Will this have a fruitful result? That's an entirely different question altogether. More recently, the FCC has taken what's considered pro-consumer stances -- Net Neutrality and rejection of the Comcast/Time Warner merger -- but has historically been considered industry-friendly.
Even if more disclosure is required, it probably wouldn't result in a full-scale transition to consumers buying set-top boxes. In the end, this is a nuisance for MVPD investors, and should continue to be watched, but this doesn't rise to the level of a direct threat to shareholders... at least not yet.
The article Bernie Sanders Joins the Fight Against This Industry originally appeared on Fool.com.
Jamal Carnette has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.