Recession puts high cable bills in different light

WASHINGTON – Beth Brodkin pays Comcast Corp. more than $200 a month for television and Internet services. The stay-at-home mom says it’s a bargain.

“My kids use the Internet for homework, we can rent movies without going to the theater, and I can use the DVR to watch all the shows I’ve missed during the day,” said Brodkin, 46, who lives in Voorhees, N.J., with her three teenagers. “When you put it all together, it’s actually a pretty cheap form of entertainment.”

The slowing economy is prompting some Americans to cut back on eating out and name-brand goods. Consumers like Brodkin are instead spending on home entertainment, providing a boon to a cable and satellite industry struggling to find new customers.

“Cable system operations have long been defensive when it comes to economic pressures on consumers,” said Tom Eagan, an analyst at Collins Stewart in New York. “Subscribers may spend less money dining out or going to the movies, but they watch more cable TV.”

Cable bills climbed about 8 percent on average in the second quarter to $123 a month on demand for digital video recorders and premium channels like Time Warner’s HBO, according to researcher SNL Kagan. By comparison, consumer prices rose 1.1 percent in the year ended June, according to figures from the Labor Department.

Year to date, cable and satellite stocks, on average, have outpaced the S&P 500 by more than 15 percent, Eagan said. Free cash flow at the three largest publicly traded cable operators, Comcast, Time Warner Cable and Cablevision Systems, has reached record levels, spurred by declining capital spending and increased sales.

Comcast is enticing customers with a campaign called “Xfinity,” which offers faster Internet speeds and more than 70,000 hours of on-demand content.

Time Warner Cable introduced a premium bundle in May geared toward high-income individuals in New York City. For $245 a month subscribers can get more attention from customer-service representatives, and the company’s most advanced services, including wideband Internet.

“In the pay-TV market you’re seeing a greater focus on driving price rather than adding new customers,” said Rich Greenfield, an analyst at BTIG Research in New York. “There’s a big opportunity to go after higher-end subs, and there seems to be a more concentrated effort around it.”