Suppose you went to the supermarket today to buy some vegetables but when you went to pay you were told you had to buy soda as well. The store manager (who you demanded to see, of course) calmly lets you know that the store doesn’t make enough margin on vegetable sales alone while they make a ton on soda so they’ve bundled them together. It’s a financial decision, and the fact that you don’t really drink much soda isn’t their problem. They won’t sell you one without the other. Ridiculous? Maybe for groceries. But you’ve been doing this for years.
Let’s start by going back only around 10 years or so. If you wanted to buy a hit song, you usually had to buy the entire CD. Oh sure, CD singles were (and still are) available, but one pays nearly as much as for the entire album, so if there are 2 songs worth buying, you buy the bundle. This changed, obviously, which has had some other implications (very few bands make real albums any more) but leaves the choice up to the consumer.
It’s sort of what’s happened as other content has moved on-line. You can go right to the stuff you want (maybe via a link, maybe via a bookmark, maybe ingesting via RSS) without having to wade through all the stuff you don’t. Admittedly, there generally isn’t money involved here but the principle is the same: consumers get to choose, and I imagine if the web was a pay model it would be a pretty a la carte world.
Today, you pay for lots of TV you don’t watch. I mean, my folks never watch MTV, ESPN, or hundreds of other channels and yet they pay a fee for them each month. The nets are joined at the hip. They’d be better off unbundling but they, and you, can’t. Oh sure, you can add-on the real premium stuff – HBO, Showtime but try and not pay for “basic” cable which may include a bunch of channels you don’t watch.
I understand both sides of the argument about why the bundled model is better for everyone. Cable companies don’t want to unbundle because they want total monthly bills to keep rising which lets them invest in infrastructure. The program suppliers don’t like the a la carte model because they like the guaranteed revenue of a monthly fee for every subscriber. For you and me, the way it is now provides a lot of different programming and may even be more cost-efficient because the operators don’t have to do all the back-room paperwork to support hundreds of thousands of different billing models. It’s not an easy answer.
And yet Fox pulled regional sports networks from Dish. Cablevision has no local Fox programming in NY or Philly. The model is getting screwed up since the additional costs for the programming will not match the additional revenues. As a former broadcaster, to me it’s pretty obvious that traditional broadcasters need to compete on a level playing field – which means generating a second revenue stream as do cable-only networks. The money should follow the eyeballs, which is why I also think consumers would rather pay for what they watch – even if it’s more per channel – than subsidize a bunch of nets they never see. It would make the negotiations to make channels available very easy – no fighting about on which tier the operator will carry a net. Just make it available, negotiate a cost, mark it up, and put it to consumers. Yes, a LOT of networks would see their carriage drop dramatically (and I’m willing to bet it will kill some of the big ones) but many of the smaller nets would benefit a lot and, most importantly, you and I get to choose to buy vegetables and not soda. Sure, make bundles available (other retail bundles things all the time and restaurants offer prix fixe menus) but also provide the a la carte option in case that pricing and programming mix is more appealing.
Never happen? I’m not sure how anyone can say that after the huge changes of the last decade. But what do you say? You’re paying $8 a month for ESPN now (although you may not know it). Would you pay $20? How about $20 if you weren’t charged for 30 other nets you never watched (and now wouldn’t be able to)? I’d pay quite a bit for CNN and other news nets, almost anything for Food Network, and I wish I could pay for a number of channels that aren’t even available on my system.
Weigh in!
Consult Keith 