July 8, 2010 / 5:19 PM / in 7 years

Cable companies, networks mull smaller TV bundles

SUN VALLEY, Idaho (Reuters) - Cable operators and entertainment companies are talking about selling cheaper cable TV packages with fewer channels to attract and keep customers trying to save money in a weak economy.

The talks, which are still at an early stage, also could give cable companies an advantage in competing with cheaper Web TV services offered by companies like Google, Netflix and Apple.

Basic cable bills have ballooned in the United States over the years as distributors add more channels, usually negotiated with program makers. Basic cable packages typically have more than 60 channels and are priced close to $80 in some regions.

But with a tough U.S. economy, weak job market and competition for disposable income from telecommunications services like Internet access and mobile phones, cable distributors and program makers realize consumers may look elsewhere for entertainment as a way to save money.

“It would be a good thing if we could all figure out a way to have one or more smaller packages that would be attractive to people who can’t afford bigger ones, especially if we could do it in a way that the entertainment companies are still able to finance the product,” said Glenn Britt, chief executive of Time Warner Cable, the second-largest U.S. cable company.

Britt was speaking on the sidelines of the annual media conference held each year in the mountain resort getaway of Sun Valley, Idaho.

Its attendees include some of the top cable and satellite TV distributors such as Comcast Corp and DirecTV, as well as programmers like Viacom, Discovery Communications and Scripps Networks.

With basic cable in some cities closing in on $80 a month, some Wall Street analysts have warned the cable industry could harm itself by continuing to raise prices well ahead of the rate of inflation.

“I think this is a real concern, but it is also a negotiating stance with programmers to see if they can reduce affiliate fees overall,” said Collins Stewart analyst Thomas Eagan.

The industry appears to have listened, but is in no rush to overhaul a revenue model that generates tens of billions of dollars a year.

“Talks are happening at some level, but not too seriously,” said Britt.

One senior media executive at the event who spoke on condition of anonymity suggested there could be a gap in the market for video programing packages streamed or delivered via cable for about $25 to $40 a month.

“I don’t think these early services are a substitute yet, but the cable guys have to always be mindful of tomorrow.”

Reporting by Yinka Adegoke. Editing by Robert MacMillan

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