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Tuesday, June 1, 2004

Buck on Cable a la Carte
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Why is ordering HBO on top of a basic cable package more expensive than just getting the channel included in the next highest pricing tier? Stuart Buck draws a nice analogy between cable TV and newspapers:

Interestingly, newspapers have chosen essentially the same approach as well. They have high fixed costs (i.e., the costs of hiring reporters and editors, paying the bills, etc.), but very low marginal costs (i.e., the cost of printing an extra copy of the paper). So they bundle together an entire package of every type of news story that someone might want to read in a given day -- politics, human interest, local stories, sports, comics, TV schedules, classifieds, etc. Anyone who wants some piece of that package enough will pay the newspaper's subscription price.

But you can't expect the newspaper to satisfy each individual reader's idiosyncracies. Take the fact that I never read the sports section, and that I would be happy to have a newspaper without it. If I demanded that the newspaper carrier actually remove the sports section from the paper every day, I would be causing an extra cost to the newspaper. Thus, I should have to pay more, not less.

The rest of Stuart's post is available here. In addition to the links therein, the NCTA has recently released a white paper on the subject and the NY Times ran an article yesterday. Perhaps I'm missing something, but I wonder why some consumer advocates who opposed the media ownership rules support cable unbundling, which could eliminate a number of the "smaller voices" out there.

posted by @ 4:21 PM | General

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