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Comment by eganist | Hacker News Reader

> the marginal cost for additional channels is near zero.

Is this really true? Setting aside barney54's ESPN example, I'd think that the emphasis in our current society on monetizing intellectual property would impose an artificial marginal cost for many service providers.

I've never worked _in_ any of the major networks or cable companies, so I could be entirely wrong, but the idea that channels present a low marginal cost to networks goes against my intuition when contrasted against e.g. Netflix/Hulu/Amazon's tendencies to cycle shows and films for cost cutting.

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Amazon bundles Prime Video with next day shipping!

The value for a lot of people, myself included, is achieved without the video, music and books. If they went away tomorrow, I would still keep prime for shipping alone.

In the US, I feel this is no longer worth it. I've found a lot of people attached to Prime for the addon services, but I wouldn't pay for Prime now that Walmart offers free two day shipping for orders over $35.

Nearly as good as Prime, no subscription. I've almost entirely switched from Amazon.

Kind of off-topic, but serious question: How long are shipping times in the US if you're not on Prime? I'm in Germany, where basically any domestic mail and parcel arrives within one day of sending it off (unless you're on Helgoland or something). Amazon still wants me to enroll in Prime to get next day shipping, but I don't and still get the item the next day anyway.

Many things with standard shipping and handling take a week or two to get to you.

A letter will take anywhere from a day to 3-5 days in the country, depending on where you are mailing to and from. This is mostly due to the expanse of the country. Boxes generally take a bit longer, and you pay for priority instead of just waiting until their load is big enough. In addition, a good number of places only work during the week to ship it out. This along with other upfront delays make it go a bit longer as well.

Oddly enough, sometimes you get packages from overseas before you get a domestic package, even though the quoted mailing time was longer.

Prime customers get priority shipping in Germany which most often means that you receive your order next morning even if you have placed the order only late afternoon. Rarely happens when you're not on Prime.

That depends on where you are in the US relative to where the good you want is stored. One thing to remember is that the US has 26 times more land mass than Germany[1]. But in general, it's 3 to 5 business days.

[1] http://www.nationmaster.com/country-info/compare/Germany/Uni...

I don't know that land mass has all that much to do with it. Even in-state mail usually seems to take at least 3 business days if you're not paying extra for the rush.

I have the opposite experience. In fact, I stopped using Priority Mail because regular First Class tends to be at least as fast, generally next day within 100 miles or two days almost anywhere within California... for 49 cents.

(First Class Mail package is a little over $2 for 2 ounces.)

If you've bundled a channel within the "basic cable" package, that channel is now being sold to millions of people. But the costs to produce/buy the content on that channel don't go up with the number of users, right?

It's not that it's cheap, but that it scales relatively quickly.

I don't know how much service providers pay to carry these channels though. I'd imagine advertising is still what covers most costs.

Cost to buy that content does go up with the number of users, the typical licencing agreement of a cable company to distribute a channel has pricing of $x/subscriber.

There can be some other conditions, e.g. if you distribute it to less than 100k subscribers then you still pay for a full 100k; or you pay $x for every subscriber that you have, no matter if you show them our channel or not; or you can distribute the nice channel A only to customers who also have our (not so nice) channels B, C and D, etc... but the core principle is that you do pay for content per subscriber.

Furthermore, the big content companies produce a lot of content in all genres, and they're (obviously) focused on their average revenue per user - and if they can get $x ARPU for their bundles, where the demand is driven by a few key channels (e.g. they expect everyone who wants A or B to pay for the whole bundle) then any a la carte unbundled packaging that would allow A or B separately makes business sense only if the a la carte customers would on average pay at least as much as the whole bundle costs. There's no extra cost to the content owner to give the whole bundle, rather the other way around (your 'shit channels' can get more advertising revenue since some of those who got it in a bundle would watch it a bit), but there is a loss of revenue if you start paying less for the channels that you do want.

Advertising covers the costs for the many shitty channels, those can be got/distributed nearly for free, but things that people actually want on their cable are quite costly, especially sports.

Thanks for this detailed answer!

I was thinking more about production costs, of course it makes sense to sell the content based on number of viewers. I'm not very aware of who pays what though.

In an alternative universe cable would work like the internet: content carriers. Netflix is basically the most popular thing (normalized for traffic) and even they are basically paying ISPs to help get served better.

Not basically, but literally: https://qz.com/256586/the-inside-story-of-how-netflix-came-t...

Comcast is charging to put data into their tube, and charging for access to the tube. They get paid on both ends. They can do this because they have no competition in most markets and there is little will in Washington to make this situation better for Americans.

Edit: also, get ready for Ajit Pai's FCC where Comcast, Verizon, ATT, TimeWarner, etc will be allowed to "zero rate" "select" services (read: when services pay their ransom). Data caps and speeds for the "regular" internet will go down without this, and first-party offerings from the ISPs will of course be exempt from the caps.

https://www.google.com/amp/s/www.wired.com/2016/11/att-time-... it's already happening. ISPs refuse to be dumb pipes and want to open additional revenue channels by figuring out creative new ways to charge everyone for moving bits across their network. They will continue unchecked and without meaningful competition.

I've read up on this, and have always felt like the nuance is important.

Netflix _could_ just rely on the standard infrastructure like everyone else, but doesn't want to because it would provide sub-standard quality. So they also have their own "ISP" that hooks into Comcast and co.

This is less like Comcast + a website, and more like Comcast + another ISP. The dynamics are different.

Because being an undifferentiated dumb pipe pushes prices down to marginal cost, which is not sustainable from a business standpoint--which would leave us with no one but the government to invest in the infrastructure. I don't know about you but I don't want Trump, Ajit Pai, and Elizabeth Warren deciding how to allocate capital for network infrastructure.

Being undifferentiated, dumb operators of flying tubes left US airlines in a precarious state. As wireless grows increasingly competitive with wireline services, the telecoms will find themselves in the exact same place.

Cost of production is completely irrelevant to eventual pricing in this kind of thing, it's all down to market power and supply&demand.

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