Friday, April 17, 2015

Stop asking for cable TV unbundling

Every now and again, usually around some FCC hearing or cable system merger - I see a lot of articles or statements highlighting the fact that consumers should be able to pick and choose which channels they get through their cable providers.

Today, you don't have much choice in who your TV provider might be (because cable companies have area monopolies, and there are only a few satellite/phone company providers of video service), and within those choices you don't have a ton of flexibility as to what channels you can get.

Every provider will have a basic package (which is almost nothing), and a couple tiers of preferred packages that include all the channels you want and many that you don't.

Some consumers argue that this is unfair, and that they shouldn't be forced to buy a bundle of 50 channels when they only want a few. So these customers argue that unbundling will be good for them - because then they can pick and choose what to buy.

Unfortunately, for most consumers, this is dumb. It's dumb because consumers think this will lead to them paying less for cable - when I think it's the exact opposite that's the case.

While I don't doubt that there are some consumers out there who only watch one or two cable channels - I think the vast majority of subscribers casually watch a lot more TV networks than they think they do (surveys say consumers watch about 17 channels, but this is likely self-reported and I would guess, pretty low).

So these customers - to get the same experience they get today, would have to buy more channels than they expect.

In addition, cable companies would absolutely charge more for the channels everyone wants. It seems like there's this notion out there that once you unbundle TV packages cable companies are all of a sudden say, 'well - we'll just have to accept the fact that we'll make less money, because there's no way we can figure out how to price these channels'.

They'd figure it out. Hell, they've probably already done the analysis to figure out what they'd do to extract as much revenue as possible from an unbundled scenario.

I think you'd end up paying the same, only instead of 180+ channels (the current average), you'd only have ~20.

I think there's a very small subset of folks who actually watch almost nothing on TV - they might save some money. But for everyone else, they'd be far worse off.

The reason why this even came up today was that Verizon announced some bundling options that are closer to an unbundled world, and guess what, I think they'd make customers worse off while paying about the same as they do today.

Verizon would offer you a set of basic channels, including:

Local affiliates
AMC (at least you get Walking Dead)
Food Network
and some others

That's not exactly a murderer's row. Especially when you consider you can get your local feeds with an antenna for free.

But you also get two 'channel packs' with that. Each channel pack is basically a category pack. These include:

Lifestyle (e.g., Bravo, TLC, History)
Entertainment (e.g., TNT, TBS, USA, FX)
News/Info (e.g., Fox, MSNBC, CNBC)
Pop Culture (E!, MTV, Comedy Central)
Kids (e.g., Nickelodeon, Disney)
Sports (e.g., ESPN, Big Ten)
Sports PLUS (e.g., Regional Sports Network - so local teams, NFL Network)

The entry price for this unbundled option giving you more 'choice' of two channel packs - is $55 a month. Oh, and if you want the Sports Plus, you have to take the Sports and Sports Plus packs as your two choices (so god help you if you like sports AND have kids or an interest in News or anything else). Oh, and these prices probably don't include HD fees, and I'm sure it probably doesn't include DVR fees either.

If you want FOUR channel packs - again, without HD or DVR, it costs $75 a month.

So for $75 a month, you'll get about 80 channels. But today you probably pay around $75 a month for cable and get 180+ channels.

But now you get to choose! So it's good? Or something.

Long story short - people need to stop positioning 'unbundling' as a win for consumers. It's a win for a very select set of consumers - those that watch very little TV, but enough to want cable at some minimal level.

I'd love to actually meet one of these people - but frankly I doubt they really exist in any big magnitude.

What unbundling will do - is allow the cable companies to better price discriminate, and make more money off big consumers, while offering a minimal solution to hold onto cord-cutters.

But we all get to choose our channels - so I guess freedom from tyranny yay?

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