This NPR story is not the first time I have come across a discussion of bundling versus à la carte, but it got me thinking about it in terms of free markets and the idea of consumer choice.
Normally, the Ayn Rand crowd likes to trumpet the free market as offering the most possible choice. But it sure looks to me like forcing consumers to take a whole bunch of channels together, or none at all, gives much more choice than would be available otherwise:
I can’t see how having only 20 channels survive would be a better situation than what we have now. It strikes me as likely too that those channels would not necessarily be very good. But let’s try to imagine first who would clearly benefit from unbundling. It would first of all have to be single individuals or maybe families/households with very similar tastes. And they would have to be content, I think, with only a very few channels, not including ESPN. It would help them save money if their channels were not too popular and thus not too expensive; but they could not be among the many channels that would not survive the unbundled world.
On the other hand, it seems likely to me that any family or individual with diverse interests, especially if that included sports, would be worse off than now. What’s not clear is whether most people would have a fair number of channels on average, and pay more than now; or if they would keep their costs lower but have a very small number of channels to choose from.
There would certainly be lots of opportunity for discord within families and relationships. People might fight about what to watch now, but thanks to DVRs and multiple TVs in the same house for no extra charge, those are mild. Imagine if they had to fight over which channels to buy on a limited budget. Kids and teens would whine and beg for another set of channels and parents would have to choose between opening up their wallets, getting rid of some of their own favorite channels, or having to hear about how Johnny down the block has nicer parents who pay for such and such channel. But teenagers with higher brow tastes than their parents would have to grow up suffering with just mainstream fare like ESPN and TNT and so on and live without AMC or IFC for instance.
Ideally I would like to see taxpayer money subsidize high-quality programming that does not garner a large audience. For instance, HBO recently within the past few years has cancelled In Treatment and Enlightened. Those are two of the most brilliant TV programs ever made, and have garnered huge acclaim from critics. But their TV audience has been relatively small. It would be nice if critics could be polled on shows that were about to be cancelled and they would have a certain amount of grant money to spend among them on the shows they voted to save from extinction.
In the meantime, though, I am just glad that consumers are not getting to pick exactly what channels they want to buy.
Choice isn’t all that meaningful when the vast majority of channels offer nothing you’re interested in. Not counting the local networks there are probably only 6-10 channels I watch on a semi-regular basis.
They’re not necessarily good under the current system of bundling. I used to watch the History Channel, TLC and Discovery on a regular basis but no longer since they’ve been overrun by ancient aliens, hillbilly beauty pageants and the Amish mafia.
I’ve decided to cancel my cable because I’m paying $90 a month isn’t worth it for the 10 channels I actually use.
I think you answered your own question right there. “The market” has determined that bundling gives you more choice, since a situation with unbundled channels gives you fewer choices.
Translation: I want other people to pay for the entertainment I want. And I want to be able to pick which shows are subsidized and which are not.
You didn’t say this, but I’m going to guess it applies as well: And I don’t want people in Kansas or Mississippi to have any say in this, because they will not give me the result I want.
Or, alternatively, ESPN would no longer be able to charge the cable companies as much for it’s programming. Which in turn would mean ESPN would no longer be able to pay as much the rights to various sporting events, and some of the profit in the sporting world would go away.
I watch some ESPN, but I don’t know that I’d pay for it in an unbundled world (and certainly not $20 a month).
I’m OK with bundles (I like having the option of scrolling through channels and stumbling on something interesting), but I’d adjust if I had to pick which ones I want at a more granular level.
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It would be nice if critics could be polled on shows that were about to be cancelled and they would have a certain amount of grant money to spend among them on the shows they voted to save from extinction.
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I don’t think it would be nice at all. I have better uses for my money than to pay your cable bill.
At the best you have two to four suppliers of programming, and are somewhat locked in, so cable is close to a natural monopoly.
However I predict that unbundling would cause a true free market. There are lots of channels which people watch occasionally, little enough so that they will not want to spend $10 or more on a cable bill for them. These channels will move to the web, and with more programming, the race to the web will accelerate. Once they are there the big channels will be forced to have a web presence also, and people will start to dump cable all together. On the web, with advertising or maybe small pay walls, we’ll see a true free market.
I bet the cable companies know this very well. It might happen any way, but unbundling will accelerate it.
What is ‘free market’ about ESPN/Disney forcing you to buy their product if you want cable/satellite? Its an involuntary $60 a year tax that only enriches already rich athletes, owners, the NCAA and Disney…
It’s free in that it’s unbound by regulations (at least insofar as bundling is allowed.) Which is the type of “free” people normally think of when they talk about free markets.
To that extent, I agree with the title of the OP: the bundling currently allowed by the free market is indeed exhibit A against the free rein of unfettered capitalism. I do not currently have cable because I do not want to pay $60 a month, at a minimum, for channels I mostly don’t want (to get channels I do want would be undoubtedly more.) It would benefit me to have a choice of a la carte channel selection.
Which isn’t to say that I think there should be a law prohibiting bundling, I’m just saying that it would benefit me personally if there were.
That’s an uncompetitive market, but I don’t think that’s really the same thing as not being a free market. There’s nothing stopping secondary cable providers from setting up shop in towns (indeed, from your link, the gov’t is encouraging them to do so). But the economics of setting up a secondary cable network are such that it doesn’t make sense for cable providers to do so.
But in anycase, I don’t think that’s really the same market. What the OP is talking about is the market for programming, which cable providers buy from networks, not the market for cable service, which customers buy from cable providers. The two are obviously related, but I don’t think the lack of competition in the latter is really affecting the former.
Really? I’d put dangerous Bangladeshi factories, less than living wages, pollution, and the housing crisis slightly ahead of people having to pay too much for cable. Exhibit ZZ maybe…
Ok, well with that sentence you just displayed a shocking level of ignorance about Ayn Rand, Objectivism, free markets, the cable industry and economics in general.
Rand’s Atlas Shrugged philosophies are not about “free market offering the best and most choices”. It is about being free from having the government or whoever step in and break up your company because it’s too successful. For example, the “Anti Dog-Eat-Dog” antitrust legislation from the book. Rand was fine with Rearden Steel and Tagard Transcontinental holding natural monopolies on rail travel and metal production.
Your desire to watch Enlightened does not give you the right to enslave others. That is what you are doing when you have the government forcibly take money out of my pocket that I’ve earned and use it to produce a show about some crazy middle-aged woman that no one apparently watches.
HBO has already proven that their business model works for original programming like Game of Thrones, Boardwalk Empire, True Blood, Entourage, The Wire, Oz, and so on and so forth. I see no reason why they must be subsidized with taxpayer money for every show anyone would want to see.
The “issue” with cable tv is that it is a “natural monopoly”. That is to say, because of network externalities, you typically don’t have more than one cable tv provider in a particular area. That does tend to limit your choices to whatever Cablevision or Time Warner or whoever offer you. However, other alternatives like Fios, satellite TV, internet tv providers like Hulu and Netflix and no tv at all also exist.
How is this the free market? I can only subscribe to Time Warner Cable. I have no choice in cable providers. Isn’t that the way it is in most of the country?
Doesn’t the Constitution allow Congress to promote “the useful arts and sciences”? Isn’t there a National Endowment of the Arts which already gives taxpayer money to PBS that airs/aired Sesame Street, Reading Rainbow, Lamb Chop’s Play Along, and Mr. Rogers Neighborhood? If you’re correct, msmith537, every American taxpayer since the 70’s has been enslaved by the chains of Mr. Snuffleupagus. What the federal government has done is ensured that quality children’s television programs will be available regardless of fluctuations in the free market, why shouldn’t quality adult programming get the same treatment?
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How is this the free market? I can only subscribe to Time Warner Cable. I have no choice in cable providers. Isn’t that the way it is in most of the country?
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A non-competitive market isn’t the same thing as a non-free market. The reason cable is non-competitive is because of the intrinsic nature of the technology, not anything to do with gov’t regulations. Indeed, gov’ts generally try to encourage more competitors to move into their markets.
So it’s a free market, just a poorly functioning one.
Right, good point. Or they would scale back on their sports coverage and more would go to PPV. I can imagine a world where the NFL makes just as much money with a far smaller audience by charging diehards through the nose–it ain’t pretty.
That’s the beauty of this scenario: whichever side you are on, you can see an angle of how free market capitalism does not necessarily provide the most utility for the most people. A more theoretical but also more dire example is that if a drug company calculated that its patented lifesaving drug would net them a ten percent increase in profits by selling it to one-ninth as many people for ten times the current price, their duty to their shareholders would be to jack up the price and let all those people die.
Point taken about Ayn Rand. I should have said something weaselly like “many libertarian economists”.
This “enslave” bit is OTT unless you are such a radical libertarian as to border on being an anarchist. Do you believe it is “enslavement” if your city council appropriates money for a mural or statue? What about if the city park has fancy landscaping, or the city uses an architectural firm to make the downtown public parking lot more aesthetically pleasing? Are those things only okay if every single taxpayer signs off? (Also: what Honesty said.)
And I can imagine a world in which everyone gets free lollipops and balloons and there are government subsidized rainbows every morning. It’s very pretty. But it’s also make believe.
There’s nothing inherently ugly about people paying what they want for a product they want. People can – and should be able to – pay whatever they want for things they enjoy.
The NFL is in the business of making as much money as possible. If they could actually get more money by going solely to pay per view, then they probably would. They haven’t. This either means that they’re wrong (which is possible), or that your scenario wouldn’t actually make them more money (which I think is more likely).
The beauty of the free market system is not that it gives people the most choices on products they want. It’s that it maximizes and allocates profits and incentives.
That can lead to more choices for consumers, because if somebody else can provide a better product then they’re able to take the cable companies’ customers and make all that profit for themselves. But it also means that the cable company’s choices are just as valid as the consumers. The cable companies are entitled to make as much money as they can from their products.
Cable companies and pharma companies have huge up front costs. Cable companies have to work out deals with content providers, and then figure out and establish the means by which the content will be delivered to consumers (e.g., laying cable, developing and installing cable boxes, etc.). Pharmaceutical companies have to spend millions of dollars developing that life saving drug, and millions more getting their drugs approved through trials. They don’t spend all that time, effort, and money out of the goodness of their hearts. They do it because they can make money by selling the end product.
It might provide the most immediate utilitarian benefit if the state took over all these products and provided them for free to everyone, but that would completely undercut the incentives for future entrepreneurs to develop or improve on those products. So while it would be great in the short term (except for the people who were not getting any reward for their hard work and investment), it would be terrible in the long run because – by getting rid of incentives and profits – it would make it less likely that people will spend time and money developing expensive products for consumers.
is the opposite of true in some cases. All else being equal, I’d rather not subsidize Fox News, for one. I’d even rather have the cable company, of all people, keep the cash and not give me the channel than to give money to that station.
But that’s immaterial because I vote with my wallet and don’t have cable.
