Comment by codex | Hacker News Reader

Comment by codex | Hacker News Reader

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I would love a la carte TV, but make no mistake: it will destroy the profitability of cable companies.

Bundling allows cable operators to segment the market: to sell the same product to different audiences at different prices depending on their willingness to pay.

A $100 package of bundled sports + movies can be sold to the person who is willing to pay $90 for sports and $10 for movies and also to the person who is willing to pay $10 for sports and $90 for movies.

But sports and movies are unbundled, they must be sold at the same price to everyone. Should they be priced at $10 each? $90? Somewhere in between? Pick any price and the cable companies lose money: the person who values it more will pay less for it than they would have, and the person who values it less won't buy it at all.

EDIT: I don't want to sound pro-cable; indeed, I am not; I am just pointing out the effects of this legislation. In some ways, bundling is a natural way to package content. MOG, Spotify, and other subscription music services bundle their content (you don't get to pick and choose what you subscribe to), and the big daddy of disruption, Netflix streaming, doesn't let you unbundle either. It's one flat fee for everything. In these cases, of course, it's easier to swallow because prices are so low to begin with. Perhaps it's not bundling that's the problem with cable, but the pricing.

It would change the business model for sure. Cable companies (and "phone companies" and ISPs and basically all data-to-the-household businesses) would become a commodity utility like electricity or water. Phrasing like "destroy the profitability" isn't really helpful here. My sewer service doesn't have the opportunity to engage in price discrimination, yet it still works.

The counter-argument would be something along the lines of "technology service cannot be commoditized -- it requires innovation and a return on investment!". To which I reply: cable companies.

I don't think you're pro-cable, I think that you're not grokking the difference between a monopoly and a competitive marketplace.

For lots of reasons, cable is effectively a monopoly. They made big capital investments, and the benefit of those investments is that every human living in a particular geography (in most places) is a captive customer.

There are a few options here.

With telephones, the government forced AT&T to divest itself from operating inter-state and intra-state networks and cede control of customer premise equipment (ie. it was illegal to own a telephone pre-1984), and eventually required the regional bell operating entities to provide access to other providers.

With electrical companies, for the most part they are able to function as monopolies for electricity delivery in a particular geography, and in exchange for that privilege their rates are tightly regulated by the State.

The problem with these options is that they are solutions driven by the states, not the federal government. The states, for various reasons (Ars Technica did some good stories about this) aren't doing much. Ala carte TV is an effort for the Feds to get involved, which I think is a bad idea. There needs to be a compromise between forcing consumers to pay $20/mo for sports content that they don't watch and getting nickle and dimed for each channel.

IMO, I'm only concerned about this as it affects universal access to internet. Cable companies are much more effective at delivering broadband than the traditional telcos, and those big TV subscriber bases almost certainly lower the cost of broadband delivery.

"will destroy the profitability of cable companies"

I would phrase it as "it will eliminate the monopoly of the cable companies". Which is a good thing. Sick and tired of the limited options we have with cable companies and the "bundles" they provide. I don't want bundles. I want to watch what I want to watch.

That would be interesting. I have exactly one choice for cable TV and Internet where I live. The alternatives (DSL or satellite) are too bad to even be worth considering.

I don't think this legislation breaks any existing monopolies, does it?

Customers shouldn't be forced to do what's best for companies.

Likewise, we have a general principal in US wherein companies should be free to develop profitable business practices.

Cable is sort of special since it's become part of our infrastructure, so it deserves some oversight, but does that extend so far as to dictate how programs are packaged?

I think a la carte is pretty tricky. I want it because I only want to watch AMC and HBO. It might not be so good for the consumer who wants 20 different networks.

Yeah, I don't see why subscribing to individual channels a la carte is necessarily more fair than bundling. Someone who watches 20 shows on 2 different channels should pay 1/10 than someone who watches 20 shows on 20 different channels?

It's like going to a pizza buffet that costs $8 for all-you-(care-to-)eat with a variety of toppings and saying, "I'm only want to eat pepperoni pizza, but you're still charging me the full $8, so I'm forced to pay for all of the other pizza I don't want."

Television is luxury, not infrastructure.

Pre-internet, it was seen as both.

That's honestly one of the most frightening facts about the second half of the 20th century.

I'm surprised at the negative replies to this comment. We usually praise start ups for using bundling or other microeconmic techniques to increase revenue, but for US cable companies it's not ok (I'm not based in the US so have no idea how hated they are - seems quite a lot). If the cable companies are abusing their monopoly then they should be prosecuted for that, but it shouldn't need this new legislation to stop their monopoly.

"bundling or other microeconmic techniques to increase revenue" -- GOOD

"abusing their monopoly " -- BAD

No one is saying cable companies are evil. But having such strong monopoly is hampering innovation. Hence, we need to try and change how cable companies operate.

Why can't they be regulated using existing US antitrust law, rather than create a new legislation specific to TV networks?

As an outsider, the US seems to have a lot of innovation in TV anyway. HBO creates the best drama series', seen all over the world, and Netflix sounds amazing. In the UK we have the BBC as a monopoly but it's sadly/oddly often more innovative than other networks.

Generally, from what I have read/heard, the companies make deals amongst each other and with municipalities to be the sole provider for an area. If this is correct, then the companies are actually working together, just not for the benefit of the consumer.

Under your scenario, the rational price for the cable company is probably something like $95 for sports or $95 for movies or $100 for both.

The idea that unbundling is going to save consumers a lot of money is strange. Cable companies sell these bundles knowing you don't watch most of what you get. We'll just switch from a scenario where the sports guy subsidizes the movies guy and the movies guy subsidizes the sports guy to a situation where everybody pays full freight.

I suspect that something like $20/month for local(ish) broadcast stations, and $10/month per additional channel will likely be the ala-cart pricing... no way they're going to lose money on this.

See my other comment in this thread for more detail, but why do we keep referring to the cable industry as some monolith? It's not true and obfuscates quality analysis.

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