By Tim Wu, The New Yorker, May 3, 2015
Dish television and Sony have introduced new ways of selling Internet TV. Will they be any more appealing to customers than expensive cable-TV bundles?
When a man named Herb MacDonald pioneered the pay-one-price, all-you-can-eat buffet in Las Vegas sometime in the in the middle of the last century, he probably did not realize that his restaurant pricing would become a model for so many businesses, particularly in the media industries. The most prominent imitators, of course, are pay-TV providers (cable, satellite, and fibre optic) who for one price offer subscriptions to a whole mess of channels such as Oxygen, HLN, MTV, Fox News, Bravo, MSNBC, E!, and so forth. (In 2014, the average number of channels subscribed to was 189.1; the average number watched was 17.5.) There are some who like this arrangement: more is more, and the payments are simple, if large. Others, however, find this buffet--or "bundle," in industry jargon--annoying or unbearable.
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In response to the above article I sent the following letter to the editor:
| In response to Tim Wu's May 3, 2015 editorial "The Dreaded Bundle | Comes to Internet TV," Wu correctly states the case from the point | of view of the retail vendor, whom he identifies as "a seller." | To more fully understand the situation I suggest that one should | consider the situation from the point of view of the programmer; | i.e., wholesale vendor. Advertising-supported program vendors are | media companies whose incomes derive from two sources: license | fees and advertising revenue. Both of these income streams vary | in proportion to the programmer's net paid circulation. In the | pay-TV world, net paid circulation is based on the number of | customers who subscribe the tier (i.e., the "bundle") on which | the signal is carried. | | Viewed from this perspective it is readily understandable that | programmers demand that cable TV companies carry their signals | on the most widely available tier; i.e. the "basic" tier. Full- | power broadcast stations have a federal right to carriage on | basic. Advertising-supported non-broadcast channels (e.g. ESPN, | CNN, Disney, etc.) write such demands into their carriage | contracts with retail vendors. | | It's no surprise programmers are now making the same demands of | internet-based bundlers.
Neal McLain