Post #24 – To bundle or not to bundle, that is the question.

Unbundling is the elephant in the cable MSO room. The recent report by Needham & Company’s Laura Martin that predicted cable networks would lose half their revenue if they were unbundled, makes this a tricky question.
Unbundling, or a la carte choice, refers to the movement by some consumer advocates and legislators, most particularly Senator John McCain, to force cable MSOs to let consumers choose which ad-supported networks they want. Almost all cable networks get a piece of the consumer’s monthly spend, from a few cents per subscriber up to a few dollars a month for ESPN.
So customers are paying for networks even if they don’t watch them, with no ability to opt out. That money, which is generally about half of a network’s revenue, is obviously a big deal. Cable networks and Internet sites are similar – most of them can’t make it without a dual revenue stream, advertising and pay. Unfortunately for the Internet, they don’t get subsidies from anyone.
But cable, particularly in the early days, needed to boost consumer demand by offering programming like CNN that they couldn’t get on broadcast TV. So the habit of paying a per subscriber fee to the networks started.
Having worked for a company that at one point was the largest MSO in the 80’s, I can tell you that one consumer complaint about cable has stayed constant for decades: too many channels. Yes, the wonderful 500 channel (or 1,000 now) bonanza has always been seen by many subscribers as a rip off. When they see channels on their box whether it’s 5 or 50, that they don’t want or watch, they assume that they’re paying for them – and they really are.
On the other hand, this is a delicate question for Reinventing Media, whose goal is more quality programming and fewer commercials in ad supported content. Without these subsidies, cable networks would undoubtedly have to cut back and some would go out of business. That same report predicts we would have about 20 ad supprted channels left.
Just when some of the networks are weaning themselves from off-network reruns with shows like Mad Men and Sharknado (joke), their foray into original programming may be cut brutally short on networks like AMC, TNT and yes, Syfy. We may never get to see Sharknado II where the sharks eat New York! Actually, that should be Sharkicane.
But seriously, ceasing this form of subsidy could be very bad for the overall quality of TV and its commercial load. After all, everybody in Britain has to pay a tax to the BBC if they own a TV set. Why not here?
But of course a compelling case can also be made that consumers shouldn’t be forced to pay for something they don’t want by these near-monopoly MSOs. It will be more than interesting to see how this particular made-for-tv drama plays out.

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