Why TV Sets Are Cheap: Cable Bills Not So Much

Because in this economy, the value of intangibles like programming has risen dramatically as people are willing to pay more for content, while the devices on which they are shown suffer from decreasing competitive differentiation.


As a result, content providers can charge more for better quality or specificity of interests or connectivity with events in demand, whereas electronics manufacturers can not. JL


Kathleen Madigan reports in Real Time Economics:

In the past five years, the price of a new TV set is down nearly 58%, while the cable bills have risen nearly 14%. New technology gets cheaper as the manufacturing process becomes more efficient (whereas) cable companies pass their higher costs onto their customers, whether you watch the new channels or not.
In the inflation gap between goods and services, one of the biggest chasms is between the price of a television set and the accompanying cable bill. In the past five years, the price of a new TV set is down nearly 58%, while the cable bills have risen nearly 14%.
What’s up with that?
The rapid fall in TV prices reflects how quickly new technology gets cheaper over as time as the manufacturing process becomes more efficient.  Inputs like LCD panels were once expensive, but not anymore. In addition, the introduction of the new ultra-high definition 4K television set puts downward pressure on all sets that came before it.
On the cable side, the price push comes from different sources, says Thomas Hazlett, an economics professor at Clemson University, who has studied the cable industry.  Cable companies are paying higher fees to cable networks. ESPN, for instance, commanded more than $6 per viewer last year. Those higher carriage costs are passed along to consumers.
In addition, says Mr. Hazlett, cable networks are producing original content, and that costs more than running, say, repeats of “Law & Order,” which also lifts fees.  Cable companies pass their higher costs onto their customers, whether you watch the new channels or not, Mr. Hazlett said.
In other words, you may not have watched an episode of “Mad Men,” but a small slice of your cable bill funded Don Draper’s martinis.