https://cdixon.org/2012/07/08/how-bundling-benefits-sellers-...
Stratechery also has written about this
Ie more choice more better.
Personally I was pissed when my reward for early evangelization of YoutubeTV was a Hike from $35 to $50. But now that it’s $65, I’m donzo.
This will take people back to the days of torrents and piracy.
I'm kind of confused, if it's an adversarial relationship where the seller is going to extract as much money from you as possible in either scenario, wouldn't some consumers prefer to pay specifically to starve out content they'd prefer not to see?
Maybe I'm not understanding this page, but it looks like it's "good" for me because instead of paying $9-10 for the History Channel alone I'll be paying $11.70 for History Channel + ESPN (which I will literally never watch)?
I'm not a calculus genius but I'd prefer to spend less money and only have what I want. This model assumes that I'd be willing to spend $3 per month on ESPN, but how does the graph look if I were willing to spend $0 per month on it? Or hell, since pricing is arbitrary, I'd like to pay -$3 per month as a courtesy for having to scroll past content I genuinely do not want to consume let alone subsidize?
A better way to think about bundle pricing is that the channels you really want cost $50, and they throw in a whole bunch of other crap for free. Why turn down free stuff?
A la carte makes no sense.
Whether that factors much into your personal value assessment or not, that is a valid downside to having a bunch of extra channels you don't intend to watch.
Is your point that I can't spend less because... they're going to get $50 out of me either way? Except that's impossible because there is no other way so there's literally no way of knowing a theoretical cost so it's safest to assume it's going to be $50 or more?
However, the economic equilibrium of a perfectly unbundled system is not that you get to watch the same thing for less money. It is, in the general case, that you either get less content, or pay more, or both.
To take your example, realize that it is outlier behavior to be willing to pay $9/mo for History and $0/mo for ESPN. If you took History channel, with the content that it has now, out of the cable bundle and tried to sell it $9/mo, or even $1/mo, there would be way too few interested customers to make such a proposition economically viable.
In a perfectly unbundled world, content such as the History channel does not exist. You only have marquee content like ESPN, movies for rental or purchase, or (if lowercase history is your thing) highly produced documentaries, i.e. the kind of content that willingness to pay for is high enough to justify the high customer acquisition cost. You do not have content like History channel because it lies in that tier of things that many people are kind of interested in watching, but only if it comes with something else more valuable that they already paid for.
One can debate the societal value of the existence of content such as the History channel to begin with, but that's what the argument is about, not about the consumer's individual preferences in a hypothetical world where it would be possible to watch the same content for cheaper.
This seems like you're saying "bundling mis-serves the customer." If the History Channel would not exist if people could pay for it directly, then why should it ought to exist?
Whether or not it is "mis-serving customers" depends a bit on whether there's abuse of monopoly power, which is an argument one can make about the cable companies, but not so much about the over-the-top services like HBO Go, Disney+, Netflix, or Prime, all of which are structured as a bundle. I'm not sure Prime customers, for example, are unhappy or feel mis-served by being able to watch TV shows on top of being able to order items with fast, free shipping. Bundling can be used for nefarious value-extraction in a monopolistic market, but it can also bring consumers value, so we shouldn't conflate the two.
In many competitive markets, bundling is often a consumer's preference that does serve customers well. For example, most coffee shops don't charge for sugar, creamer, and other condiments, and you maybe have some aggrieved consumers complaining that they should get a discount for drinking only black coffee. It's likely that coffee creamer companies would go bankrupt if people had to pay for condiments at every coffee shop, and we can debate whether it's even a good idea then. But on the whole, I don't think that turns into an argument that coffee shops are mis-serving customers by providing condiments that are free of charge, that is to say, bundled with the price of coffee.
Personally I live in an almost perfectly unbundled world of content already, because I tend to buy or rent the TV shows that I'm personally interested in. This works for me because I have little time to watch, don't like ads, and have enough disposable income that I'm not thinking twice about cost, but I'm not sure that many other consumers would be satisfied with the kind of entertainment experience where they have to pay $2 per episode of their favorite show.
History Channel is cheap to make compared to sports, would definitely be able to pay for itself with cheap subscriptions.
Cable TV with bundling is just a local maxima established decades ago. The long tail of interest that drives regular youtube is the proof.
That article is an absurdly oversimplified model. In the real world, the networks would find some way to diversify between the $3 and $10 channel offerings, letting them get $3 from the $3 person and $10 from the $10 person.
edit: Correction, they do mention this common and widespread approach... in a footnote. Without saying anything about why it wouldn't work.
It's like saying that you'd be willing to pay for a $2/month Spotify subscription for only the genres of music you want. That's not how the economics work. Going a la carte would mean paying as much as a bundle, for less content.
The problem here is that people's mental models are fundamentally self-centered. They imagine paying half or less for just the channels they want.
But in total, that would mean media companies getting half or less the revenue, for producing the same content -- since the marginal cost of giving extra channels is basically zero, they don't gain any money back by giving you fewer channels. Now, media companies aren't that profitable, the math simply doesn't work out, they wouldn't be able to actually make all that content. Many channels would simply be cut.
Of course, broadcast technology doesn’t support that and we have decades of industry built around a different model, giving all of the incumbents a strong incentive to resist any sort of change.
You're arguing past people. Plenty have said they're fine paying the same or more for access to less content.
I used to watch about 2 shows a week on BBC (UK; 1-1.5hrs) and disagreed with paying £M to TV show presenters who just preside over long, talky adverts for Hollywood movies and mainstream media. So I don't pay (nor watch) anymore.
I'd pay to watch those couple of shows separately. As it happens though they occasionally make their way to Netflix, so I don't have to ... but I'd still pay to watch them when they're still current.
Looks to me like there's money left on the table.
Personally I'd like to see some form of legislation that requires shows to be made available to consumers if they are available to other channels - I could pay double to BBC what Netflix pay them to get the show and we'd both win; and I wouldn't mind having it on Netflix, might watch it again.
Now BBC is a special case; I can't work out why they need to compete commercially, nor why we allow showmakers to form companies to be paid through, etc.. they should work on salaried staff paid on civil service pay scales IMO.
Really? I haven't seen anyone say they want to pay more for less content. The unspoken assumption always seems to be "if I was getting fewer channels I'd be paying less", logic which works fine for tangible goods, but less so for ones with nearly zero marginal cost to produce.
I don't even want a la carte, I'm fine with just "It's on Netflix/Hulu/HBO Max or I don't need to watch it." I'm not willing to pay more than $20 a month for TV most months, with the rare extra service to get caught up on a show I really like.
Its not unbundling you really want, or a-la-carte, it's just a lower price tag.
You have correctly identified the business case for cinema and DVDs.
Like, a single movie DVD/Blu Ray costs about as much as an entire month of Netflix. Unless you're hardly watching any TV shows or movies on Netflix, that's just an awful value.