Just Explain It

Why is cable TV so expensive?

Most people only watch about 10 to 20 TV channels so why are we shelling out hundreds of dollars for hundreds of channels we’re not watching?

With the cost for cable TV increasing at 4 times the rate of inflation, it’s no wonder consumers are fed up and dropping pay-TV altogether. In the last five years, five million TV subscribers cut the cord to rely solely on online platforms like Hulu Plus and Netflix

At a time when you can get premium content for less than $10 a month, is cable TV worth the price? Let’s take a look at the business of cable.

Media companies like Disney and Fox charge cable providers like Comcast and Cablevision for the content they create. The cable providers, in turn, pass those costs on to you.

The most expensive channels cost subscribers about $1.42 a month. On average, you are paying $1.40 for TNT, a dollar and three cents for the Disney Channel, and 72 cents for TBS. The average price is about 22 cents for a channel.

Now, sports content like ESPN's is by far the most expensive for over $6 a month – that’s $72 a year – and most times you’re paying up whether you watch it or not. Why top dollar for sports? Networks pay big bucks for the rights to broadcast the games -- Monday Night Football alone costs ESPN close to $2  billion a year.

The good news is that some cable providers like Verizon Fios are offering packages that exclude sports content. Their Select HD package costs $49.99 – a $15 discount. That’s closer to what consumers say they want to pay -- which is $30 a month for the few channels they really want. But an a la carte world could increase your TV bill, say the experts at Needham & Company.

For every dollar you pay as a subscriber, $1.24 is paid by advertisers to fund content creation, according to Needham. Needham analysts argue that paying for channels a la carte would decrease ad dollars and force networks to charge more to the consumers to keep them going. For the most basic cable package, $10 to $20 is the average rate. Anything above that will run you between $30 all the way up to over $100.

Unfortunately, that’s not all you’re paying for. Equipment rental fees for your set-top box, DVR, and sometimes even your remote control all bump up the bottom line.

On top of all that, the fees forced on cable providers, including franchise fees and regulatory fees, are again passed onto you.

All in all, cable providers are projected to collect $123 per month from every subscriber in 2015. But these companies are trying to improve service, offering thousands of on-demand choices, and allowing access on other devices. Apps like HBO Go let you watch shows on your phone, tablet or desktop.

If you’re looking to cut costs, it doesn’t have to be all or nothing. Consider mixing and matching with a more basic cable package and adding on a subscription to a streaming service like Netflix, Hulu Plus, or Amazon Prime Instant Video.

Does the cost of your cable bill make sense for your budget? Let us know @YahooFinance.

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