The Fastest-Growing Cost for Cable Companies
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Cable TV prices keep going up, but cable companies may not be entirely to blame. A big part of what determines the price consumers pay for TV is how much media companies -- the network owners -- charge distributors for their channels.
And those costs are increasing quickly. Comcast's (NASDAQ: CMCSA) programming expense, to cite one example, increased 8.4% in the first half of the year and the company said it expects programming expenses to continue to increase."
But one group of media companies are increasing their prices at an outstanding pace. The average cable system paid traditional broadcasters -- CBS (NYSE: CBS), Twenty-First Century Fox (NASDAQ: FOX), Disney's (NYSE: DIS) ABC, and Comcast's NBC -- 63% more in retransmission fees during 2014 as compared to the previous year, according to a recent FCC report. And the spike didn't end there. Analysts expect retransmission fees to increase faster than they had originally projected through the rest of the decade.
A brand-new revenue stream for broadcasters
Most broadcasters have only started ramping up their retransmission fees in the last decade or so. For example, when Comcast took over the broadcaster in 2009, NBCUniversal CEO Steve Burke said it had practically $0 in retransmission revenue. It's since grown it into an $800 million revenue stream.
CBS grew retransmission and reverse-compensation fees from its affiliate broadcaster 44% this year, and it expects to bring in over $1 billion. ABC is growing its revenue faster than Disney's strong catalog of cable networks.And Fox increased retransmission revenue 20% through the first nine months of fiscal 2016.
But there's a lot more growth ahead still
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Adam Levy has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. 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.