[mythtv-users] All clear QAMs gone in Portland, OR

Eric Sharkey eric at lisaneric.org
Sat Nov 2 01:18:30 UTC 2013


On Fri, Nov 1, 2013 at 1:24 PM, Gary Buhrmaster
<gary.buhrmaster at gmail.com> wrote:
> On Fri, Nov 1, 2013 at 4:57 PM, Eric Sharkey <eric at lisaneric.org> wrote:
> I think we are going to have to agree to disagree that bundling
> is a positive.  Bundling saves money only in imperfectly competitive
> markets.

One more attempt, then I'll stop.

Consider a market with two channels and two subscribers.  Each channel
needs $10 to be profitable.

Customer A values the channels at $3 and $8, while customer B values
them at $8 and $3 respectively.  If bundled in a $10 package, both
customers will buy the bundle and receive services they value above
the cost of those services.  If unbundled and priced at $5/each, each
customer will only purchase only one channel, neither of which will be
profitable and both will fail.  It's lose-lose-lose as the channel
loses, the provider loses, and the customer loses as well.

This is exactly the kind of economics at play here, although,
obviously on much larger scales.  Individual customers will have
vastly differing opinions on what a channel is worth and it's hard to
set a price on single channels which is both high enough to support
the channel and yet low enough that enough subscribers will be willing
to pay that price.  MTD will pay $50/mo for ESPN, but I'd probably
drop it at 50 cents/mo.

There are other ways to do it, of course.  You could give flexible
volume discounts or each and every customer could negotiate individual
rates, but these systems would be much more complicated than the
current arrangements, which are complicated enough.

> In the end,
> the MSOs and content providers are unlikely to choose to un-bundle
> without being forced to do so because it maximizes their net revenue.

On that point we agree, but being forced to do so is definitely
something that could conceivably happen.  Every so often you hear John
McCain complaining about this.

Eric


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