OT: From Adweek - A la Carte Is the Worst Idea Anyone Has Ever Had

[temery]

I see the future as a la carte shows, not a la carte channels.

 

[upperdeck]

You do realize that internet and TV are already coming over the same connection, right?

no they are not depending on the company you are using.

i have Sat and DSL. there will never be a world where i could watch tv over my internet connection in any volume . i can watch 20 tvs at a time in HD on Sat . I can watch 1 maybe 2 SD shows on DSL.

now if you have FIOS you are using some of the same switching. but you only using that for the last 5% of the feed. even many of the newer stuff is only fiber to the node not fiber to the house

 

[Scooch]

I see the future as a la carte shows, not a la carte channels.

That already exists via iTunes and Amazon.

It's incredibly difficult to scale that though. It's an unlikely future in a world where the biz model is even remotely similar to how it exists today.

 

[riskylogic]

no they are not depending on the company you are using.

i have Sat and DSL. there will never be a world where i could watch tv over my internet connection in any volume . i can watch 20 tvs at a time in HD on Sat . I can watch 1 maybe 2 SD shows on DSL.

now if you have FIOS you are using some of the same switching. but you only using that for the last 5% of the feed. even many of the newer stuff is only fiber to the node not fiber to the house

Yeah, satellite is different. But, having just switched from comcast to verizon -- there is still just one connection that handles internet/tv/phone. So, if there is more bandwidth for TV, then it is designed that way. Could be easily redesigned.

 

[Millhouse]

A la carte is only going to benefit people that want literally one to three channels, and want to pay half their bill for them. I could live on ESPN only. I'd be willing to pay $25, instead of $100.

But once you add up the channels you, and your wife, and your kids need, most people are going to be very unhappy with a la carte.

I agree they should allow both. Let me buy ESPN for $25 and maybe AMC for $10 and be done with it.

The vast majority will stick with a full cable slate though. This idea that people will be able to buy the "15 channels they want" for a couple bucks each is pure fantasy.

And you better hope that none of the channels you watch are "niche" channels, because would go away immediately.

I don't disagree that the cable model is majorly messed up. But it actually does work.

People who don't understand bundling logic underestimate the value the get from the channels they only watch occasionally

Sent from my DROIDX using Tapatalk 2

 

[KaiserUEO]

I see the future as a la carte shows, not a la carte channels.

then i will charge you $5 a month for my new show if you buy it before it comes on.

but if its a hit...
$10 after the 1st week.
$20 after the 2nd.
$50 after...

a la carte will be a pricing option that in the end, very few people in America will choose.

the old, the close minded and the simpletons being your demographic.

Oh Lord

 

[riskylogic]

then i will charge you $5 a month for my new show if you buy it before it comes on.

but if its a hit...
$10 after the 1st week.
$20 after the 2nd.
$50 after...

a la carte will be a pricing option that in the end, very few people in America will choose.

the old, the close minded and the simpletons being your demographic.

Oh Lord

You are missing one key point: Any bundle that includes BTN must die, at whatever cost.

 

[KaiserUEO]

You are missing one key point: Any bundle that includes BTN must die, at whatever cost.

i want the BTN. theres a very good chance they will have a good game on often.

 

[Moontan]

Could be easily redesigned.

Redesigned, maybe.
I suspect that the radical change that you're looking for would require lots of new equipment. MSOs are not looking to replace equipment in every home.

DOCSIS 3.0 provided a big potential boost in data throughput. Perhaps the next evolutionary version will be enough for many households.

For my household's use over the past few years, with 4-6 concurrent HD streams in use several times per week it likely wouldn't. When I visit a friend's house with U-Verse, the concurrent HD usage limitation raises its ugly head from time to time.

 

[shantydaze]

You are missing one key point: Any bundle that includes BTN must die, at whatever cost.

I would like the BTN to continue to be successful and allow the ACCN to become widely available. Not only does a rising tide raise all boats, living in the Midwest, this is the only way to get a lot of the SU football games without having to purchase the ESPN college football package.

 

[Scooch]

Redesigned, maybe.
I suspect that the radical change that you're looking for would require lots of new equipment. MSOs are not looking to replace equipment in every home.

DOCSIS 3.0 provided a big potential boost in data throughput. Perhaps the next evolutionary version will be enough for many households.

For my household's use over the past few years, with 4-6 concurrent HD streams in use several times per week it likely wouldn't. When I visit a friend's house with U-Verse, the concurrent HD usage limitation raises its ugly head from time to time.

For sure. I have U-Verse and when just two HD streams are occurring simultaneously there is a noticeable decay in picture quality.

It's not an insurmountable problem over time, but it IS a problem.

 

[cuseinchina]

People who don't understand bundling logic underestimate the value the get from the channels they only watch occasionally

Sent from my DROIDX using Tapatalk 2

If you guys are right and the consumer will demand the bundle once they see what a la carte looks like...why the heck are the cable companies fighting so hard to keep it from coming - there is no reason to fight a battle you already think you've won it just causes collateral damage to the industry. The reason they oppose it is because they know that bundling is a monopolistic practice and a ripoff to most consumers.

Good content providers have absolutely nothing to fear from a la carte. Nor do niche channels that have a core following. In fact they will see margins go up as they no longer have to cut in the cable co. But why should my 70 year old father-in-law who watches PBS and BBC world support ESPN's propensity to overpay for sports content? It just doesn't make any sense. Again if you think bundling is great, let the market work its will and most people will stay bundled. But imposing bundling is un-American and anti-competitive and presumes that the vast majority of garbage produced for TV is some kind of public good to be protected.

 

[Scooch]

If you guys are right and the consumer will demand the bundle once they see what a la carte looks like...why the heck are the cable companies fighting so hard to keep it from coming - there is no reason to fight a battle you already think you've won it just causes collateral damage to the industry. The reason they oppose it is because they know that bundling is a monopolistic practice and a ripoff to most consumers.

Good content providers have absolutely nothing to fear from a la carte. Nor do niche channels that have a core following. In fact they will see margins go up as they no longer have to cut in the cable co. But why should my 70 year old father-in-law who watches PBS and BBC world support ESPN's propensity to overpay for sports content? It just doesn't make any sense. Again if you think bundling is great, let the market work its will and most people will stay bundled. But imposing bundling is un-American and anti-competitive and presumes that the vast majority of garbage produced for TV is some kind of public good to be protected.

Better question... why are all the new technology companies trying to get into the TV business maintaining the bundle model?

Apple, Google, Intel, Sony... they're all dummies?

 

[cuseinchina]

Better question... why are all the new technology companies trying to get into the TV business maintaining the bundle model?

Apple, Google, Intel, Sony... they're all dummies?

Easy answer - there will always be a bundled option because some consumers will want that.

Still would love to get an answer for the question I posed - and please don't say it's because the cable company cares about consumer choice.

 

[Scooch]

Easy answer - there will always be a bundled option because some consumers will want that.

Still would love to get an answer for the question I posed - and please don't say it's because the cable company cares about consumer choice.

Nope, that's not why those companies are pursuing a bundle model at all.

Your question about a la carte doesn't make sense to me, so I can't answer it. I don't think you understand what "monopoly" means.

 

[cuseinchina]

Nope, that's not why those companies are pursuing a bundle model at all.

Your question about a la carte doesn't make sense to me, so I can't answer it. I don't think you understand what "monopoly" means.

The question is not difficult - if you and others here think there is so much value for consumers in the bundle, why then should the cable companies be fighting so hard to stop a la carte? Why not let consumers choose to bundle or not and price accordingly. Not sure what is unclear about that question. My contention is that the cable companies fight because they know they will lose a tremendous amount of money and become a 'dumb pipe'. I was in a small meeting with a comcast exec probably ten years ago now and he basically said we'll be able to keep a la carte at bay hopefully for his tenure as ceo but it was the thing that scared him more than anything. they now know it's coming and hope to jack up the rates on internet access for people who don't buy the bundle. Google fiber and others will eventually take the profit out of that as well and the cable industry will go back to being what it always should have been, a boring utility that returns its cost of capital but little more and gets compensated by price increases for investments in technology that help consumers. That kind of company certainly won't command a 20% valuation premium to the S&P like comcast does today - THAT is why cable executives don't want bundling - their bonus pool will dry up and their stock holdings will lose 40% of their value (at least).

I also didn't say the cable companies enjoyed a true monopoly, it's more like a duopoly depending on region and availability of alternatives, though the alternatives are, with the exception of places that have fios, not truly competitive equivalent offerings (satellite plus a crappy dsl connection is not an equivalent offering to comcast's services). But the bundle came from a time when cable companies were truly a collection of tiny local monopolies. they were like cement companies but with better barriers to entry. Consolidation enhanced their power versus the content side and consumers since the few large players remaining collude on pricing and offerings for the most part so consumers can't cry fowl. Bundling has remained in the early innings of the limited competition coming from satellite and telcos because of the controlling relationship the industry has built with content providers. Greater bandwidth, faster speeds, and a good interface make that relationship close to meaningless. So while the cable companies are not true monopolies (which i never said), the bundle is certainly monopolistic (which is what i said) and springs from a time when cable companies were true monopolies. Monopolistic practices happen in the space between Oligopoly and monopoly, the differentiator being how much, not if, the consumer gets shafted.

Bundles will be for the old, the rich, and the lazy. you can buy one but don't force me to.

 

[Scooch]

It's stunning that a corporation would fight to maintain a lucrative business model.

 

[rosconey]

It's stunning that a corporation would fight to maintain a lucrative business model.

dam straight-thats why we still have buggy makers in syracuse-gotta get that stuff to the erie canal somehow

 

[cuseinchina]

It's stunning that a corporation would fight to maintain a lucrative business model.

You still for some reason don't directly answer my question after calling my understanding of economics into question. How 'bout a response to #66 in the thread. You seem unwilling to delve beyond the surface in your defense of the bundle - thus the one liner response and questioning my knowledge without offering direct retort. You are clearly a smart guy with well developed thoughts on this - I'd really like to hear your response.

 

[Scooch]

You still for some reason don't directly answer my question after calling my understanding of economics into question. How 'bout a response to #66 in the thread. You seem unwilling to delve beyond the surface in your defense of the bundle - thus the one liner response and questioning my knowledge without offering direct retort. You are clearly a smart guy with well developed thoughts on this - I'd really like to hear your response.

Sigh.

Look, you clearly have an intractable POV on this, and that's fine. I'm not motivated to write a multi-paragraph response that you will pick apart.

My answer is that it's not unusual for an industry, or a corprpation within said industry, to work to retain a lucrative business model. At the same time, an industry/corporation can also recognize changing marketplace conditions and prepare for a future where said business model is different, to some degree.

People need to stop thinking in such binary terms about this. Marketplaces and models change, usually incrementally over time.

I look at it this way... in the late 90s into the 2000s a combination of widespread broadband access, mp3 technology, file sharing capabilities, and Apple radically altered the landscape of the music business. In 2000 there were roughly 900 million CDs sold in the U.S. By 2010 that fell to about 250 million. A decade of pervasive access, technology and consumer awareness, and yet the CD still wasn't entirely dead. Massive decline, no doubt, but not dead.

The TV marketplace is changing, but is in an entirely different place than the newspaper or music industry for a host of reasons. The industry will continue to fragment, a variety of different models will emerge, and consumers will have a large degree of choice, depending on what they want to spend and how much content they want access to.

That's it, that's what I have to say.

 

[cuseinchina]

Sigh.

Look, you clearly have an intractable POV on this, and that's fine. I'm not motivated to write a multi-paragraph response that you will pick apart.

My answer is that it's not unusual for an industry, or a corprpation within said industry, to work to retain a lucrative business model. At the same time, an industry/corporation can also recognize changing marketplace conditions and prepare for a future where said business model is different, to some degree.

People need to stop thinking in such binary terms about this. Marketplaces and models change, usually incrementally over time.

I look at it this way... in the late 90s into the 2000s a combination of widespread broadband access, mp3 technology, file sharing capabilities, and Apple radically altered the landscape of the music business. In 2000 there were roughly 900 million CDs sold in the U.S. By 2010 that fell to about 250 million. A decade of pervasive access, technology and consumer awareness, and yet the CD still wasn't entirely dead. Massive decline, no doubt, but not dead.

The TV marketplace is changing, but is in an entirely different place than the newspaper or music industry for a host of reasons. The industry will continue to fragment, a variety of different models will emerge, and consumers will have a large degree of choice, depending on what they want to spend and how much content they want access to.

That's it, that's what I have to say.

Sounds like we are actually pretty much in agreement on how it plays out (minus the sigh). Our differences are on the bundle - you and other seem to think it's better for consumers and should be imposed on consumers and I disagree. But your statement here indicates that while you feel that way, you know that a la carte to some degree will be an option for consumers as alternative transmission of content penetrates the home. You still didn't address my core point about bundles being monopolistic, anti-competitive, and bad for consumers. But we can agree to disagree on that. Either way I am sure people will be able to bundle their content in the future if they so desire, regardless of device or method of transmission.

 

[nzm136]

If you guys are right and the consumer will demand the bundle once they see what a la carte looks like...why the heck are the cable companies fighting so hard to keep it from coming - there is no reason to fight a battle you already think you've won it just causes collateral damage to the industry. The reason they oppose it is because they know that bundling is a monopolistic practice and a ripoff to most consumers.

Good content providers have absolutely nothing to fear from a la carte. Nor do niche channels that have a core following. In fact they will see margins go up as they no longer have to cut in the cable co. But why should my 70 year old father-in-law who watches PBS and BBC world support ESPN's propensity to overpay for sports content? It just doesn't make any sense. Again if you think bundling is great, let the market work its will and most people will stay bundled. But imposing bundling is un-American and anti-competitive and presumes that the vast majority of garbage produced for TV is some kind of public good to be protected.

Underlined: This is not right. 1. A la carte would hurt the margins of absolutely every content provider and content deliverer and 2. a la carte doesn't necessarily mean the end of cable, so it doesn't necessarily mean cutting out the middle man. Similarly, bundling can happen without cable. Websites do it all the time (see the adult entertainment industry).

Here's an illustration:
IF:
Person 1 values Channel A at $10 and Channel B at $0
Person 2 values Channel A at $10 and Channel B at $0
Person 3 values Channel A at $0 and Channel B at $10
and those are the only 3 people in the market
THEN:
Channel A's carriage rate will be $6.67 ($20 total)
Channel B's carriage rate will be $3.33 ($10 total)
and customer subscription rates will be $10.00 ($30 total)
*Person 1 will pay $10 and get Channel A for a price that he is willing to pay to get it, and Channel B for free
*Person 2 will pay $10 and get Channel A for a price that he is willing to pay to get it, and Channel B for free
*Person 3 will get Channel A for free, and pay a price that he is willing to pay to get Channel B, which equals $10.

Nobody is paying for anything that they don't want. Nobody ever pays more than the value of the content that they want and are receiving. Once a customer makes a payment, that customer's payment is collected and combined with all the other similarly situated customers' payments, and the money is collected into a pool, where it is distributed as per a series of individual contracts, which are based on the level of interest and the extent of that interest in the relevant community. Although it appears that each subscriber is supporting all three channels, as they receive all three channels and the fees are bundled together, it is not random chance that Channel A receives $20, which is the amount that Person 1 + Person 2 are willing to pay for it and Channel B receives $10, which is the amount that person 3 is willing to pay for it.

Bold: He doesn't. He is a member of a demographic that was taken into account when ESPN negotiated their rates, and the rates were adjusted accordingly based on the size and characteristics of the demographic as a whole.

Here's an illustration:
THE FUTURE
When separate: (a la carte)
Person 1 will pay $3 for Channel A and $5 for Channel B
Person 2 will pay $3 for Channel A and $5 for Channel B
Person 3 will pay $5 for Channel A and $3 for Channel B
When sold separately, a cable company will charge $3 for access to Channel A and $5 for Channel B. They will make $9 off of Channel A via 2 willing subscribers and they will make $10 off of Channel B via 2 willing subscribers. That's a total of $19 between the two channels.
THE PRESENT
When grouped: (bundled)
Person 1 will pay $8 for the bundle of Channel A+B ($3+$5=$8)
Person 2 will pay $8 for the bundle of Channel A+B ($3+$5=$8)
Person 3 will pay $8 for the bundle of Channel A+B ($5+$3=$8)
When bundled, the cable company will charge $8 for the bundle and sell it to 3 willing customers. That leads to $24 in revenue, which is $5 more than if sold separately.

As noted in an earlier post, it's worth noting that my numbers for statement two are very cherry-picked in that gains from bundling will not be realized from all combinations. However, since the cable companies can pick what channels they are grouping together, they get to cherry pick their channels. And since I can assure you that the cable companies don't group channels randomly, cherry-picking doesn't lead to an inaccurate explanation of the forces at play in the real world.

Italics: No. Bundling is the end effect of a semi monopolistic environment, which is the inevitable conclusion to a purely capitalist system, and there's nothing more American than capitalism.

 

[cuseinchina]

Underlined: This is not right. 1. A la carte would hurt the margins of absolutely every content provider and content deliverer and 2. a la carte doesn't necessarily mean the end of cable, so it doesn't necessarily mean cutting out the middle man. Similarly, bundling can happen without cable. Websites do it all the time (see the adult entertainment industry).

Here's an illustration:
IF:
Person 1 values Channel A at $10 and Channel B at $0
Person 2 values Channel A at $10 and Channel B at $0
Person 3 values Channel A at $0 and Channel B at $10
and those are the only 3 people in the market
THEN:
Channel A's carriage rate will be $6.67 ($20 total)
Channel B's carriage rate will be $3.33 ($10 total)
and customer subscription rates will be $10.00 ($30 total)
*Person 1 will pay $10 and get Channel A for a price that he is willing to pay to get it, and Channel B for free
*Person 2 will pay $10 and get Channel A for a price that he is willing to pay to get it, and Channel B for free
*Person 3 will get Channel A for free, and pay a price that he is willing to pay to get Channel B, which equals $10.

Nobody is paying for anything that they don't want. Nobody ever pays more than the value of the content that they want and are receiving. Once a customer makes a payment, that customer's payment is collected and combined with all the other similarly situated customers' payments, and the money is collected into a pool, where it is distributed as per a series of individual contracts, which are based on the level of interest and the extent of that interest in the relevant community. Although it appears that each subscriber is supporting all three channels, as they receive all three channels and the fees are bundled together, it is not random chance that Channel A receives $20, which is the amount that Person 1 + Person 2 are willing to pay for it and Channel B receives $10, which is the amount that person 3 is willing to pay for it.

Bold: He doesn't. He is a member of a demographic that was taken into account when ESPN negotiated their rates, and the rates were adjusted accordingly based on the size and characteristics of the demographic as a whole.

Here's an illustration:
THE FUTURE
When separate: (a la carte)
Person 1 will pay $3 for Channel A and $5 for Channel B
Person 2 will pay $3 for Channel A and $5 for Channel B
Person 3 will pay $5 for Channel A and $3 for Channel B
When sold separately, a cable company will charge $3 for access to Channel A and $5 for Channel B. They will make $9 off of Channel A via 2 willing subscribers and they will make $10 off of Channel B via 2 willing subscribers. That's a total of $19 between the two channels.
THE PRESENT
When grouped: (bundled)
Person 1 will pay $8 for the bundle of Channel A+B ($3+$5=$8)
Person 2 will pay $8 for the bundle of Channel A+B ($3+$5=$8)
Person 3 will pay $8 for the bundle of Channel A+B ($5+$3=$8)
When bundled, the cable company will charge $8 for the bundle and sell it to 3 willing customers. That leads to $24 in revenue, which is $5 more than if sold separately.

As noted in an earlier post, it's worth noting that my numbers for statement two are very cherry-picked in that gains from bundling will not be realized from all combinations. However, since the cable companies can pick what channels they are grouping together, they get to cherry pick their channels. And since I can assure you that the cable companies don't group channels randomly, cherry-picking doesn't lead to an inaccurate explanation of the forces at play in the real world.

Italics: No. Bundling is the end effect of a semi monopolistic environment, which is the inevitable conclusion to a purely capitalist system, and there's nothing more American than capitalism.

Your idea of how this works involves an imaginary world where none of the content providers have greater pricing power than their peers when it comes to negotiations with the cable companies. It ignores the fact that viewer demographics are at least as important as quantity of eyeballs in the eyes of advertisers. It assumes that the cable companies are indifferent when it comes to carriage rates for their self-produced content and content that allows them the most local ad revenue versus content produced by others and content produced by providers who don't have pricing power and do not have good ad demographics for the cable co. it assumes that the proportion of revenue going to each content provider is equivalent on a percentage basis - eg fair dealing. And finally it ignores the fact that the cable company take margin from the content providers in exchange for carriage and that the amount it takes is dependent on the relative power of the content provider.

NONE OF THESE ASSUMPTIONS HAVE ANY BASIS IN REALITY. Why, because bundling is monopolistic and inherently harms consumers who don't prefer the bundle and harms all consumers in the form of price fixing and overpaying for content we may not desire. The cable company is the middle man, cutting out the middle man and still allowing for bundling when consumers desire it, is better for both consumers and providers of quality and/or niche content. The only losers are cable company executives and investors who will get stock returns of a utility instead of the stock returns of a oligopolistic entity.

You also miss the primary point that a la carte, when it comes will not require the cable company to be anything but a dumb pipe - other players will gladly aggregate content for consumers who want a bundle and they won't charge you a fee for it, they will just insert their advertising. Or the cable companies will do the same thing but at a much lower price because they will be forced to do so by competition.

 

[nzm136]

Your idea of how this works involves an imaginary world where none of the content providers have greater pricing power than their peers when it comes to negotiations with the cable companies. It ignores the fact that viewer demographics are at least as important as quantity of eyeballs in the eyes of advertisers. It assumes that the cable companies are indifferent when it comes to carriage rates for their self-produced content and content that allows them the most local ad revenue versus content produced by others and content produced by providers who don't have pricing power and do not have good ad demographics for the cable co. it assumes that the proportion of revenue going to each content provider is equivalent on a percentage basis - eg fair dealing. And finally it ignores the fact that the cable company take margin from the content providers in exchange for carriage and that the amount it takes is dependent on the relative power of the content provider.

NONE OF THESE ASSUMPTIONS HAVE ANY BASIS IN REALITY. Why, because bundling is monopolistic and inherently harms consumers who don't prefer the bundle and harms all consumers in the form of price fixing and overpaying for content we may not desire. The cable company is the middle man, cutting out the middle man and still allowing for bundling when consumers desire it, is better for both consumers and providers of quality and/or niche content. The only losers are cable company executives and investors who will get stock returns of a utility instead of the stock returns of a oligopolistic entity.

You also miss the primary point that a la carte, when it comes will not require the cable company to be anything but a dumb pipe - other players will gladly aggregate content for consumers who want a bundle and they won't charge you a fee for it, they will just insert their advertising. Or the cable companies will do the same thing but at a much lower price because they will be forced to do so by competition.

You have a very flawed understanding of the system.

For starters, you're confusing revenue drivers. Carriage rates are one revenue driver and advertising is another. Ultimately, they both factor into the decision process of both networks and cable providers (that's why there is free TV over the air and that's one of the reasons why general interest content is on low tiers, whereas niche content is on specialized tiers). Admittedly, they both influence each other in that carriage rates (especially on lower tier, general interest content) are often lower than their otherwise optimal level so as to increase the number of viewers and thus increase advertising revenue. However, the two revenue drivers are two separate things. It's like putting a gum ball machine in a barber shop. Hair cuts and gum ball sales both make money, and gum ball sales are linked to the number of people that come into the shop to get their hair cut, but to argue that hair cuts and gum balls are the same thing is obviously crazy. What affects one dos not necessarily affect the other. Up until this point, we have been talking about carriage rates. If you want to talk about advertising revenue too, fine, but that's a whole different animal. And, to answer your question, large companies generally don't give preference for "in house" operations. They go with whatever is more profitable. Exxon is the classic example. If you think that you're only getting Exxon gas next time you pull into an Exxon station, you're out of your mind. Everything is competitively bid amongst the silos that make up the greater organization.

Beyond that, bargaining power doesn't affect the general shape of the payouts. A company with X bargaining power an Y value will make more than a company with X bargaining power and Z value to the extent that Y is greater than Z, regardless of what X is. In other words, bargaining power affects how much of the value created by a network returns to the network, not if some of that value returns to the network. That's why bargaining power doesn't matter for the purposes of this discussion. And your assumption about what you assumed that I assumed is wrong and in left field.

"NONE OF THESE ASSUMPTIONS HAVE ANY BASIS IN REALITY." No. That statement has no basis in reality. You have offered no proof to dispute anything that I said. Instead you have discussed advertising revenue in a discussion about carriage charges (notice how those are two different things?) and you brought up bargaining power in an effort to dispute that companies are rewarded for providing their customers with more valuable products. However, the balance of bargaining power only alters how much of the increased value goes where. You never attacked the basic economic idea that grouping multiple products together can create a new product with a different price elasticity than the sum of the parts.

"Why, because bundling is monopolistic and inherently harms consumers who don't prefer the bundle and harms all consumers in the form of price fixing and overpaying for content we may not desire." How does this differ in any way from what I wrote? Where have I ever said or implied that bundling didn't result in more money for cable companies and less money for consumers?

"The cable company is the middle man, cutting out the middle man and still allowing for bundling when consumers desire it, is better for both consumers and providers of quality and/or niche content." A la carte v. bundled programming and cable-provided content v. internet content are two COMPLETELY different discussions. A la carte can happen via cable (PPV), and bundling can happen via internet once again, see the adult industry). Going a la carte does NOT mean cutting out the middle man. You are 100% wrong. Delivering content via the internet may very well mean cutting out the middle man (it also might not), but that has absolutely NOTHING to do with a la carte. And no, bundling is ONLY good for the consumer when the provider is dumb enough to bundle the wrong things together. Given that there is way too much money on the line for providers to make a mistake that sophomoric, bundling will NEVER be good for consumers in general. IF such a situation were to arise where to arise where consumers could choose to go a la carte or bundle, the consumers who would save money by going a la carte would go a la carte and the consumers who would "game the system" by bundling would bundle. That would cost the providers potential profits, which would drive them to either remove bundling completely or remove a la carte completely. A hybrid model will not work for the providers, and they are smart enough to know it.

 

[cuseinchina]

You have a very flawed understanding of the system.

For starters, you're confusing revenue drivers. Carriage rates are one revenue driver and advertising is another. Ultimately, they both factor into the decision process of both networks and cable providers (that's why there is free TV over the air and that's one of the reasons why general interest content is on low tiers, whereas niche content is on specialized tiers). Admittedly, they both influence each other in that carriage rates (especially on lower tier, general interest content) are often lower than their otherwise optimal level so as to increase the number of viewers and thus increase advertising revenue. However, the two revenue drivers are two separate things. It's like putting a gum ball machine in a barber shop. Hair cuts and gum ball sales both make money, and gum ball sales are linked to the number of people that come into the shop to get their hair cut, but to argue that hair cuts and gum balls are the same thing is obviously crazy. What affects one dos not necessarily affect the other. Up until this point, we have been talking about carriage rates. If you want to talk about advertising revenue too, fine, but that's a whole different animal. And, to answer your question, large companies generally don't give preference for "in house" operations. They go with whatever is more profitable. Exxon is the classic example. If you think that you're only getting Exxon gas next time you pull into an Exxon station, you're out of your mind. Everything is competitively bid amongst the silos that make up the greater organization.

Beyond that, bargaining power doesn't affect the general shape of the payouts. A company with X bargaining power an Y value will make more than a company with X bargaining power and Z value to the extent that Y is greater than Z, regardless of what X is. In other words, bargaining power affects how much of the value created by a network returns to the network, not if some of that value returns to the network. That's why bargaining power doesn't matter for the purposes of this discussion. And your assumption about what you assumed that I assumed is wrong and in left field.

"NONE OF THESE ASSUMPTIONS HAVE ANY BASIS IN REALITY." No. That statement has no basis in reality. You have offered no proof to dispute anything that I said. Instead you have discussed advertising revenue in a discussion about carriage charges (notice how those are two different things?) and you brought up bargaining power in an effort to dispute that companies are rewarded for providing their customers with more valuable products. However, the balance of bargaining power only alters how much of the increased value goes where. You never attacked the basic economic idea that grouping multiple products together can create a new product with a different price elasticity than the sum of the parts.

"Why, because bundling is monopolistic and inherently harms consumers who don't prefer the bundle and harms all consumers in the form of price fixing and overpaying for content we may not desire." How does this differ in any way from what I wrote? Where have I ever said or implied that bundling didn't result in more money for cable companies and less money for consumers?

"The cable company is the middle man, cutting out the middle man and still allowing for bundling when consumers desire it, is better for both consumers and providers of quality and/or niche content." A la carte v. bundled programming and cable-provided content v. internet content are two COMPLETELY different discussions. A la carte can happen via cable (PPV), and bundling can happen via internet once again, see the adult industry). Going a la carte does NOT mean cutting out the middle man. You are 100% wrong. Delivering content via the internet may very well mean cutting out the middle man (it also might not), but that has absolutely NOTHING to do with a la carte. And no, bundling is ONLY good for the consumer when the provider is dumb enough to bundle the wrong things together. Given that there is way too much money on the line for providers to make a mistake that sophomoric, bundling will NEVER be good for consumers in general. IF such a situation were to arise where to arise where consumers could choose to go a la carte or bundle, the consumers who would save money by going a la carte would go a la carte and the consumers who would "game the system" by bundling would bundle. That would cost the providers potential profits, which would drive them to either remove bundling completely or remove a la carte completely. A hybrid model will not work for the providers, and they are smart enough to know it.

Dude - the two main points of your prior post were that the customer never pays for something they don't want with bundling (eg bundling is good or at least neutral to consumers) and that an end to bundling will result in lower margins for all content providers (regardless of quality or market demand for their product). In this response you refute your whole premise.

As for your first paragraph here, money is fungible. It may be that the advertising division recognizes one revenue stream generated by content and another division recognizes subscriber revenue generated by that same content - but it is the total profit generated by that content that matters to the cable company.

Your second paragraph you say bargaining power doesn't matter, but then you also say my father-in-law shouldn't mind paying $90/month to watch bbc and pbs because ESPN pays too much for content and has bargaining power because he's paying a fair price for bbc and pbs. Those two concepts are mutually exclusive, they can't both be true. With bundling the guy who watches 25 channels regularly and spends 4 hours a day rotting his mind, is certainly better off than my father in law who spends probably 5 hours a week watching 2 channels. Maybe the aggregate consumer wins...so in total the group does better with bundling (though I doubt this) but we are not a socialist society where the aggregate good trumps your personal choices.

Fair point on your final paragraph except that the only thing that will drive the cable company to a la carte is if/when MASS MARKET content providers find alternative delivery over the internet. So the two are in a sense one and the same, though the timing may not be identical.