Trouble Ahead for Cable?

Cable and satellite television services are the single biggest entertainment expense for American households. And that spells trouble for the industry.

In 2010, the average household spent $621 on cable/satellite television services--53 percent more than in 2000, after adjusting for inflation. Average household spending on this category increased 2 percent between 2009 and 2010 alone, despite an 8.5 percent decline in overall spending on entertainment. Cable/satellite services now rank 18th among the categories on which the average household spends the most, up from 33 in 2000.

The cable/satellite industry has gotten too big to get away with this much longer, turning itself into a target for budget-cutting consumers and lower-priced competitors. A recent Harris poll shows a large share of households looking for ways to cut their cable bill. Twenty-one percent have cancelled or cut back on cable spending in the past six months, and another 22 percent considered cuts. With alternatives to cable/satellite services now emerging, the industry is headed for a haircut.