Your example is highly simplified, to the point that it's incapable of exibiting the features that cause people to object to bundling, and demand ala carte.
Let us say that the cable station carries not two, but 100 channels. And you want to watch not one, but ten channels. The station offers ten bundles of ten channels each, which you must pay separately for.
If the list of channels you want to watch happens to corrispond to one of the pre-existing bundles, you're in hog heaven: You pay for ten channels, and watch ten channels. Peachy.
However... What you actually find in practice is that the bundles are cunningly composed so that each bundle only contains perhaps one or two channels you actually wish to view, while most of the channels in a bundle you either have no interest in, or find actively obnoxious. And so you have to buy, and pay for, maybe seven separate bundles of channels, in order to get the ten you really want to watch. The promise of ten channels for a low, low price turned out to be a cheat.
It's rather as though you went into a Chinese restaurant, intending to eat sweet and sour shrimp, with an egg roll on the side, and a pot of tea. Only to find that the food is bundled so that in order to get the tea you must order the Peking Duck dinner, the egg roll is only available with the Mongolian beef, the shrimp is a side dish that comes with an order of egg foo yung, and the sweet and sour sauce has to be drained out of a serving of sweet and sour pork.
And so, to put together your perfectly ordinary lunch, you have to order, and pay for, a feast for four, most of which you have to throw away. While the guy at the next table, who luckilly wanted tea with Peking Duck, eats the same amount of food for a quarter of what you paid.
Oh, and don't tell me it would be insanely expensive to administer ala carte; They've already got the necessary tools in place, in order to handle pay per view.
Tim
· 4 years ago
Brett, the simplification is designed to illustrate the concept that bundling increases welfare for both the consumer and the cable company. I could make the same argument with more channels, but the math would be even more tedious.
As for there being bundles featuring combinations you don't like: well, life's tough. If I want Britney Spear's "Toxic" on CD, I'm "forced" to buy all the other songs on that album, even if I don't want them. If I want a cell phone for daytime calls, I'm "forced" to buy evening and weekend calls too. If I buy Lucky Charms, I'm "forced" to buy the toy at the bottom of the box as well.
The fact that the bundles companies decide to offer please some customers more than others doesn't strike me a problem requiring government remedy. The point is that a la carte cable won't save most customers money. Rather, the average customer will end up paying about the same price for far fewer channels.
Brett Bellmore
· 4 years ago
Customers whose preferences happen to match a pre-existing bundle pay less under a system of bundling. Customers whose preferences are a poor match for the bundles offered pay far, far more under bundling, because they must purchase many bundles in order to assemble the bundle THEY want from bits and pieces of the others.
I agree, it's not a matter that ought to be addressed by legislation. I merely object to the claim that the specific people asking for ala carte are being irrational. THEY would be better off under such a system, even if the average consumer might not be.
And I'd argue it's an empirical question whether even the average consumer is better off under bundling... The assumption you're making is that the cable company is TRYING to design bundles to satisfy as many consumers as cheaply as possible. There are other strategies they could pursue, that aren't so beneficial to the customer.
All Comments
Your example is highly simplified, to the point that it's incapable of exibiting the features that cause people to object to bundling, and demand ala carte.
Let us say that the cable station carries not two, but 100 channels. And you want to watch not one, but ten channels. The station offers ten bundles of ten channels each, which you must pay separately for.
If the list of channels you want to watch happens to corrispond to one of the pre-existing bundles, you're in hog heaven: You pay for ten channels, and watch ten channels. Peachy.
However... What you actually find in practice is that the bundles are cunningly composed so that each bundle only contains perhaps one or two channels you actually wish to view, while most of the channels in a bundle you either have no interest in, or find actively obnoxious. And so you have to buy, and pay for, maybe seven separate bundles of channels, in order to get the ten you really want to watch. The promise of ten channels for a low, low price turned out to be a cheat.
It's rather as though you went into a Chinese restaurant, intending to eat sweet and sour shrimp, with an egg roll on the side, and a pot of tea. Only to find that the food is bundled so that in order to get the tea you must order the Peking Duck dinner, the egg roll is only available with the Mongolian beef, the shrimp is a side dish that comes with an order of egg foo yung, and the sweet and sour sauce has to be drained out of a serving of sweet and sour pork.
And so, to put together your perfectly ordinary lunch, you have to order, and pay for, a feast for four, most of which you have to throw away. While the guy at the next table, who luckilly wanted tea with Peking Duck, eats the same amount of food for a quarter of what you paid.
Oh, and don't tell me it would be insanely expensive to administer ala carte; They've already got the necessary tools in place, in order to handle pay per view.
As for there being bundles featuring combinations you don't like: well, life's tough. If I want Britney Spear's "Toxic" on CD, I'm "forced" to buy all the other songs on that album, even if I don't want them. If I want a cell phone for daytime calls, I'm "forced" to buy evening and weekend calls too. If I buy Lucky Charms, I'm "forced" to buy the toy at the bottom of the box as well.
The fact that the bundles companies decide to offer please some customers more than others doesn't strike me a problem requiring government remedy. The point is that a la carte cable won't save most customers money. Rather, the average customer will end up paying about the same price for far fewer channels.
Customers whose preferences happen to match a pre-existing bundle pay less under a system of bundling. Customers whose preferences are a poor match for the bundles offered pay far, far more under bundling, because they must purchase many bundles in order to assemble the bundle THEY want from bits and pieces of the others.
I agree, it's not a matter that ought to be addressed by legislation. I merely object to the claim that the specific people asking for ala carte are being irrational. THEY would be better off under such a system, even if the average consumer might not be.
And I'd argue it's an empirical question whether even the average consumer is better off under bundling... The assumption you're making is that the cable company is TRYING to design bundles to satisfy as many consumers as cheaply as possible. There are other strategies they could pursue, that aren't so beneficial to the customer.