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The Rise and Rise of Cable TV: Demand elasticity of cable television during the Great Recession
Unformatted Document Text:  CABLE SUBSCRPITIONS The Rise and Rise of Cable TV: Demand elasticity of cable television during the Great Recession In May 2008, the United States economy began to slide into what mainstream media eventually termed the “Great Recession” (Izzo, 2009). Beginning that month, the percentage of unemployed Americans consecutively rose for the next 15 months, from 5.4% in May 2008 to 10.1% in October 2009 (United States Department of Labor, 2010). Local economies in certain Designated Market Areas (DMA’s) – metropolitan areas defined by The Nielsen Company for purposes of gathering ratings – were negatively affected by this economic recession. Rising unemployment, large drops in home sales and stagnant Gross Metropolitan Products are a few indicators showing how these cities fiscally suffered (Brookings, 2010). The same time period saw increased subscriptions to Cable and Alternate Delivery Services (ADS) – such as satellite television (Direct TV or Dish) and AT&T U-verse – while revenue for the cable industry rose by 5.4% (National Cable & Telecommunications Association, 2010). Also, during that 15-month period of recession, most of the hardest hit DMA’s saw the largest rise in Cable/ADS subscription penetration. Conventional wisdom would say that, during times of economic hardship, households might cut their media-related spending to accommodate a more limited budget. However the above statistics suggest that those services – which range in cost from about $25 to $150 per month (National Cable & Telecommunications Association, 2010) – may now be seen as necessities by consumers, thus making their demand inelastic with respect to loss of income or a looming income reduction. This is in keeping with the Permanent Income Hypothesis, and is supported by a comparison of data sets that show as economic instability increased in certain DMA’s, consumers did not appear to cut spending on Cable/ADS subscriptions. 3

Authors: Danelo, Matthew.
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The Rise and Rise of Cable TV:
Demand elasticity of cable television during the Great Recession
In May 2008, the United States economy began to slide into what mainstream media 
eventually termed the “Great Recession” (Izzo, 2009). Beginning that month, the percentage of 
unemployed Americans consecutively rose for the next 15 months, from 5.4% in May 2008 to 
10.1% in October 2009 (United States Department of Labor, 2010). Local economies in certain 
Designated Market Areas (DMA’s) – metropolitan areas defined by The Nielsen Company for 
purposes of gathering ratings – were negatively affected by this economic recession. Rising 
unemployment, large drops in home sales and stagnant Gross Metropolitan Products are a few 
indicators showing how these cities fiscally suffered (Brookings, 2010). The same time period 
saw increased subscriptions to Cable and Alternate Delivery Services (ADS) – such as satellite 
television (Direct TV or Dish) and AT&T U-verse – while revenue for the cable industry rose by 
5.4% (National Cable & Telecommunications Association, 2010).  Also, during that 15-month 
period of recession, most of the hardest hit DMA’s saw the largest rise in Cable/ADS 
subscription penetration.
Conventional wisdom would say that, during times of economic hardship, households 
might cut their media-related spending to accommodate a more limited budget. However the 
above statistics suggest that those services – which range in cost from about $25 to $150 per 
month (National Cable & Telecommunications Association, 2010) – may now be seen as 
necessities by consumers, thus making their demand inelastic with respect to loss of income or a 
looming income reduction. This is in keeping with the Permanent Income Hypothesis, and is 
supported by a comparison of data sets that show as economic instability increased in certain 
DMA’s, consumers did not appear to cut spending on Cable/ADS subscriptions.

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