Reply to thread

Message: [QUOTE="nzm136, post: 726997, member: 2531"] You are in left field on paragraph one. That ruling doesn't say that internet sites can't be bundled together. There is no reason why FOX and ESPN can't charge admission to their site (ESPN already does for ESPN3.com and Rupert Murdoch already does for many of his companies, like the Wallstreet Journal Online) and there is absolutely no reason why ESPN and FOX can't agree that access to one site will give access to another, as is and has been a common practice in the adult industry (which has billions of dollar in revenue every year) for over 20 years. The fact that cable companies can't bundle internet access with cable services is completely irrelevant. In fact, more likely than not, free services like Hulu.com will replace broadcast TV for many Americans, and site membership, like a general membership to "Disney Online" with an added "Advanced Sports Package" that gives customers access to ESPN3.com and ABC sports will replaces cable for many Americans. Although that would be 100% online, it would be just as bundled as cable TV is today, and absolutely none of it is illegal under current law. "The question is not whether my father-in-law is WILLING to subsidize ESPNs propensity to overpay for sports rights which is then passed on to people who never watch a game because he wants to get BBC and PBS." He doesn't. ESPN's carriage rate is based off of value provided to the cable provider, which is a product of customer of interest, not ESPN operating costs. Your father-in-law is a member of a demographic that isn't interested in ESPN. When ESPN negotiated with the cable companies, their rates were adjusted accordingly. Your father-in-law only appears to subsidize them (i.e. nominally subsidized them). However, a bunch of other people are nominally subsidizing your father-in-law's shows. And, at the end of the day, it balances out such that the amount that your father-in-law nominally subsidizes channels like ESPN is equal to the amount that others nominally subsidize his channels. For purposes of economics, he ONLY buys the channels that he wants and he gets the rest for free. There is no actual subsidy. At best, there is a variable price that changes with the person, but that A) isn't a subsidy, and B) is way too complicated to explain over a sports board. Anyway even if there was a subsidy, which there isn't, ESPN's costs are not directly relevant to their revenues. ESPN is paid based on the value that they provide, not on their operating costs. Once again, if ESPN does overpay for content, THEY will incur the losses. Neither the cable provider, nor the customers pick up the tab. As for "morals," there is nothing immoral about asking someone to pay fair market price for a luxury good. If your father-in-law didn't think that he was getting a good deal (i.e. the programming wasn't worth at least what he pays for it), then he wouldn't buy it. Nobody is making him have it and it isn't essential for life. I want a Ferrari Enzo, but Ferrari won't sell me one for the $20 in my pocket. Does that make Ferrari "immoral?" If so, feel free to step in and make the world more just by giving me the difference. "For one thing carriage fees are not replaced by ad revenue, rather they are replaced by subscriber revenue from consumers who will pay for the content they want, not the right to watch many channels." This isn't true. If it was true, bundling wouldn't exist as is. Bundled programming, when done right, is far more efficient at extracting value from customers than a la carte. A switch from efficient bundling to a la carte would lead to a loss in carriage rate revenue and, although rates of specific channels would nominally go up, customers would end up paying less, which would increase the number of customers who have access to cable channels, improving advertising revenue. However, that increase in advertising revenue would no equal the decrease in carriage rates. Look at my example a couple posts ago where a la carte yielded $19 in revenue, whereas bundling yielded $24. That's what's happening. When done right, bundling creates situations where channels are grouped together in such a way that customer's preference for those channels is a product of random chance. Since random chance tends to balance out, customer's preference for the bundle as a whole is close to being uniform, an a bunch of customers with a uniform valuation of a product is the ideal situation for extracting value from the sale of that product. THAT is why bundling happens. I'll give you an example: . . . . . . . . . . . . . . . Product A . . . . . . Product B Customer 1 . . . . . . $3 . . . . . . . . . . . .$1 Customer 2 . . . . . . $2 . . . . . . . . . . . .$2 Customer 3 . . . . . . .$1 . . . . . . . . . . . .$3 There is a total of $12 of value in those two products ($1 + $2 + $3 + $3 + $2 + $1 = $12). The a la carte rate for both product would be $2 each and it would yield a combined $8 ($4 for Product A and $4 for Product B). The combined rate if the products were bundled together would be $4 and all 3 customers would pay $4 for access to the two channels. Since the total value of the channels is $12, switching from a la carte to bundling increased value extraction efficiency from 67% (8/12) to 100% (12/12). As for having higher nominal rates in a la carte, that's true, but those rates do not make up the difference, assuming that the initial bundling was done correctly. I'll give you an example: . . . . . . . . . . . . . . . Product A . . . . . . Product B Customer 1 . . . . . .$4 . . . . . . . . . . . . $0 Customer 2 . . . . . .$3 . . . . . . . . . . . . $1 Customer 3 . . . . . .$1 . . . . . . . . . . . . .$3 Customer 4 . . . . . .$2 . . . . . . . . . . . . .$2 Customer 5 . . . . . . $4 . . . . . . . . . . . . .$0 Customer 6 . . . . . . $0 . . . . . . . . . . . . .$2 There is a total of $22 that can be extracted from these two products ($4 + $3 + $1 + $1 +$3 + $2 + $2 + $4 +$2 = $22). The grouped rate for the Product A + Product B combo would be $4 and yield revenue of $20, which is 91% efficient (20/22 = 91%). Nominally, they might have a rate of $2 each ($4/2 = $2). When sold a la carte, the rate for Product A would be $3 and the rate for Product B would be $2 and it would cost $5 ($3 + $2 = $5) to get access to each channels. However, only three people would buy Product B and 3 people would buy Product A. That creates a return of $15, which is only 68% efficient (15/22 = 68%). In the end, even though the price to have access to both products increased from $3 to $5, and the price for Product B alone is more than the initial package price, the cable provider lost 23% of their value extraction efficiency, which translates into $5 loss. However, 6 people would have access to one of the two channels, so advertising rates could very well go up. To clarify, the first example shows how bundling can be more efficient at extracting value. Admittedly these numbers are cherry picked, but that's actually OK because content providers can and do cherry pick what they bundle together. Furthermore, we know that the media landscape looks this way because content providers bundle content together and why else would they bundle the content if it wasn't making them money? The second example shows how going to a la carte can lead to more total viewers and thus more advertising dollars. I freely admit that this is only one of many possibly scenarios, but, given that there are only two revenue drivers, and as seen in the last example, switching from a bundled system to a la carte harms one revenue driver, increases in advertising revenue is the only way that there would be some hope of mitigating the loss. However, the increase in advertising revenue isn't enough to offset the total loss, otherwise content providers would go a la carte. This example also shows how it is possible for content providers to switch to a la carte and raise nominal carriage rates, but still be less efficient. Admittedly, this is only one possible scenario, but it is obviously the case that switching to a la carte would result in diminished profits, otherwise content providers would do it. That means that even if switching to a la carte meant higher individual channel carriage rates (which it [I]probably[/I] does), there would still be a net loss. "Once you cut out the middle man cable company, consumers and content providers will split the cable company's monopoly take between themselves..." Yes, internet distribution will probably be more efficient and lead to lower prices, but A) you are simply trading middle men (albeit in a favorable manner) and B) it is in the network's interest to be bundle/be bundled. It adds value to their product. They would do it amongst themselves, even if there wasn't a cable company involved. Your entire point about changes in technology is mostly irrelevant. I have to wonder, though. I know way more about the business/economics side of the equation than I do about the technical side. However, I wonder how much of the internet infrastructure is also used by cable companies. If it's a lot of the same wires/equipment, then cable is essentially subsidizing internet and internet is subsidizing cable. That means that the loss of one (i.e. cable) will cause the other (i.e. internet) to go up in price to the extent that they shared fixed costs. If that's the case, the net gains from transferring to a more efficient technology may be far less than you think. "In short, the cable company adds almost no value to consumers of content in a world where alternative transmission is possible." The act of bundling changes elasticities, which creates value. If the cable company isn't the one doing it, someone else will. In fact, networks already negotiate to be bundled in certain ways when they negotiate with the cable companies. The cable companies are more like the tools of the networks, not the evil geniuses you make them out to be. "the contradictory statements" I have yet to make a contradictory statement. You simply make a series of unsubstantiated statements and then put words in my mouth. For example, you claimed that I said "bundling is good or at least neutral to consumers," even though I never said anything of the like. In reality, you irrationally assumed that I meant that, despite a number of statement made by me that are directly to the contrary. However, if you think that I am wrong and am contradicting myself, please feel free to show me where. As for your 1-1 ratio, keep in mind that it is an internet sports board. Write "UCONN s*cks" in a post followed by it's "____ O'clock and Georgetown still s*cks" and you are pretty much guaranteed 3-5 likes (and rightfully so) [/QUOTE]

Verification: What is a Syracuse fan's favorite color?