12 thoughts on “All about bundling vs à la carte, content selection, and fees.”
Weird. I’ve been encountering Megan McArdle’s written words for more than a decade now. And that’s not just the first time I’ve agreed with her on anything; it’s the first time I’ve not thought she was incredibly and intentionally wrong and misleading.
So therefore, I must now reexamine my long-standing position that the bundle is good for consumers, starting from scratch. (I know even a stopped clock is correct twice a day, but she’s never correct.)
I disagree that we necessarily want bundling. With the hotel metaphor, you don’t want to charge for every little thing, but the customer may not want to pay for a hotel that has a pool and a gym. And with hotels, there are usually many options where you can find a room with the amenities and price you are looking for. The metaphor would be more like you needing to pay double for a hotel room which has a pool, a gym, a 24/7 concierge, a business center, and continental breakfast (none of which you will take advantage of) all so you can have access to a shuttle to the airport. Her metaphors are about paying separately for things you want, not being forced to pay for many things just to get one.
Yes, on average people would pay the same for a la catre, but there would be a large range depending on how many channels you actually watch.
She even used “The Wire” as an example of a niche show that would get hurt by unbundling. But it’s HBO which is already a la carte. The other example she gave was “Mad Men”. But AMC wouldn’t be hurt by an a la carte approach since it is by far the most popular channel owned by it’s company and is used as leverage to get cable companies to pay for IFC, WE tv, and SundanceTV. AMC has the high rated cable show for God’s sake.
She’s dead on about everyone wants bundles. In fact channels are bundles too (why do I have to pay for HBO, when I just want to watch Game of Thrones?).
People just want their bills to go down and want more options. The cable companies have an essential service (telecommunications) and they tye it to non-essential services like video programming.
We need a new model, one without channels. But certainly one that’ll still be a bundle.
@Chuckie, wow you and I are polar opposites. I’ve followed McCardle from magazine to magazine because I think her insights are usually dead on. It’s not hard to see why she’s right on this one. Volume discounts are super common in every area of commerce, and bundling is essentially a volume discount. “Get 100 channels for the price of 20!” If they unbundle, we’ll get 20 channels for the price of 20 and call it progress, I guess.
Some of the details or examples are poor. But the overarching theme that bundles may be preferable to a la carte resonates with me. Indeed, my thinking has changed over the last few years. What possibly rubs many the wrong way, including me, is not “the bundle” but our perceived value – prices keep going up, customer service is frequently awful, unnecessary roadblocks (CableCARD support or Comcast’s handling of HBO GO, for example), etc. I’d think folks would respond favorably to smaller, more economical bundles whereas a la carte may not be sustainable. And we’re seeing that from at least Verizon and Comcast in my region, where new plans are being offered to new customers – solid broadband speeds, a smaller number of channels, plus HBO for like $60 a month. Of course, that’s promotional pricing… but it’s a new, interesting approach. Sling TV, Sony, Verizon’s OTT offerings could further improve the situation – competition is good.
“@Chuckie, wow you and I are polar opposites. I’ve followed McCardle from magazine to magazine because I think her insights are usually dead on. It’s not hard to see why she’s right on this one.”
Look. I basically agree that “she’s right on this one”. Just inexplicably bizarre, given her story.
But, as stated, I have a long history with her. I’ve engaged in comment debates with her, all the way back in her “Jane Galt” persona, and repeatedly caught her out in brazen out-and-out lies. Hell, if you’re ideologically OK with her going as “Jane Galt” in the first place, then you’ll probably excuse her lying as being ‘helpful to the cause’. Rand would approve! But at a bare minimum, I place a value on basic intellectual honesty.
But the general execrableness or not of McCardle is besides the point on this particular topic, where we are in general agreement…
Yeah I’m not a Randian but I like her just the same. But I agree that debating her merits here is not a good use of anyone’s time. In the spirit of peace, I offer someone who agrees with us that we can surely agree on:
Just to clarify my horribly unclear pronouns — I like McCardle, not Rand. I know very little about the latter.
“In the spirit of peace, I offer someone who agrees with us that we can surely agree on”
Yeah. I’m well on record as thinking that a cable sub is an incredible bargain. Multicast bundles FTW. (Especially if you’ve got a proper DVR like a TiVo to properly harvest all the goodies.)
“I like McCardle, not Rand. I know very little about the latter.”
The latter: Serial killer worshipper. Vehement denouncer of the welfare state who defended her own Medicare benefits to the death. Intellectually dishonest pundit who’s inexplicably influenced a generation of grifters.
The problem with the existing model is that those involved in the supply keep seeing the size of the pie and trying to get a larger slice driving up cost and price. As long as the customers keep up the demand, there is no incentive to work at keeping the costs down. Unfortunately a lot of people screw up the demand curve despite the opportunity cost of doing so. I don’t subscribe to HBO but I know people who are lower income who have admitted to juggling which set of bills to skip paying for the month who have subscriptions to every channel, HBO, Netflix, and Hulu. I’ve never been one to call customer retention and so am part of the problem, but I’m getting closer to becoming a cord cutter.
My fav comment regarding example of hotel charges (specifically $10/day internet)
“It turns out that PPV porn was an attempt to recapture the revenue from rooms only used for an hour by extra marital affairs. First we had Mad Men affairs. Porn killed Mad Men affairs. WiFi killed PPV porn. People who only want to watch Mad Men are killing bundles. It is the great circle of life.”
Gotta love it :)
Am I the only one who finds it questionable that an article praising the cable bundle comes from a company that makes a a good chunk of its money from being part of the cable bundle? Of course, Bloomberg wants you to keep your cable TV. They profit from that, don’t they?
Weird. I’ve been encountering Megan McArdle’s written words for more than a decade now. And that’s not just the first time I’ve agreed with her on anything; it’s the first time I’ve not thought she was incredibly and intentionally wrong and misleading.
So therefore, I must now reexamine my long-standing position that the bundle is good for consumers, starting from scratch. (I know even a stopped clock is correct twice a day, but she’s never correct.)
I disagree that we necessarily want bundling. With the hotel metaphor, you don’t want to charge for every little thing, but the customer may not want to pay for a hotel that has a pool and a gym. And with hotels, there are usually many options where you can find a room with the amenities and price you are looking for. The metaphor would be more like you needing to pay double for a hotel room which has a pool, a gym, a 24/7 concierge, a business center, and continental breakfast (none of which you will take advantage of) all so you can have access to a shuttle to the airport. Her metaphors are about paying separately for things you want, not being forced to pay for many things just to get one.
Yes, on average people would pay the same for a la catre, but there would be a large range depending on how many channels you actually watch.
She even used “The Wire” as an example of a niche show that would get hurt by unbundling. But it’s HBO which is already a la carte. The other example she gave was “Mad Men”. But AMC wouldn’t be hurt by an a la carte approach since it is by far the most popular channel owned by it’s company and is used as leverage to get cable companies to pay for IFC, WE tv, and SundanceTV. AMC has the high rated cable show for God’s sake.
She’s dead on about everyone wants bundles. In fact channels are bundles too (why do I have to pay for HBO, when I just want to watch Game of Thrones?).
People just want their bills to go down and want more options. The cable companies have an essential service (telecommunications) and they tye it to non-essential services like video programming.
We need a new model, one without channels. But certainly one that’ll still be a bundle.
@Chuckie, wow you and I are polar opposites. I’ve followed McCardle from magazine to magazine because I think her insights are usually dead on. It’s not hard to see why she’s right on this one. Volume discounts are super common in every area of commerce, and bundling is essentially a volume discount. “Get 100 channels for the price of 20!” If they unbundle, we’ll get 20 channels for the price of 20 and call it progress, I guess.
Some of the details or examples are poor. But the overarching theme that bundles may be preferable to a la carte resonates with me. Indeed, my thinking has changed over the last few years. What possibly rubs many the wrong way, including me, is not “the bundle” but our perceived value – prices keep going up, customer service is frequently awful, unnecessary roadblocks (CableCARD support or Comcast’s handling of HBO GO, for example), etc. I’d think folks would respond favorably to smaller, more economical bundles whereas a la carte may not be sustainable. And we’re seeing that from at least Verizon and Comcast in my region, where new plans are being offered to new customers – solid broadband speeds, a smaller number of channels, plus HBO for like $60 a month. Of course, that’s promotional pricing… but it’s a new, interesting approach. Sling TV, Sony, Verizon’s OTT offerings could further improve the situation – competition is good.
“@Chuckie, wow you and I are polar opposites. I’ve followed McCardle from magazine to magazine because I think her insights are usually dead on. It’s not hard to see why she’s right on this one.”
Look. I basically agree that “she’s right on this one”. Just inexplicably bizarre, given her story.
But, as stated, I have a long history with her. I’ve engaged in comment debates with her, all the way back in her “Jane Galt” persona, and repeatedly caught her out in brazen out-and-out lies. Hell, if you’re ideologically OK with her going as “Jane Galt” in the first place, then you’ll probably excuse her lying as being ‘helpful to the cause’. Rand would approve! But at a bare minimum, I place a value on basic intellectual honesty.
But the general execrableness or not of McCardle is besides the point on this particular topic, where we are in general agreement…
Yeah I’m not a Randian but I like her just the same. But I agree that debating her merits here is not a good use of anyone’s time. In the spirit of peace, I offer someone who agrees with us that we can surely agree on:
http://stratechery.com/2013/the-cord-cutting-fantasy/
He’s always fascinating on these topics.
Just to clarify my horribly unclear pronouns — I like McCardle, not Rand. I know very little about the latter.
“In the spirit of peace, I offer someone who agrees with us that we can surely agree on”
Yeah. I’m well on record as thinking that a cable sub is an incredible bargain. Multicast bundles FTW. (Especially if you’ve got a proper DVR like a TiVo to properly harvest all the goodies.)
“I like McCardle, not Rand. I know very little about the latter.”
The latter: Serial killer worshipper. Vehement denouncer of the welfare state who defended her own Medicare benefits to the death. Intellectually dishonest pundit who’s inexplicably influenced a generation of grifters.
The problem with the existing model is that those involved in the supply keep seeing the size of the pie and trying to get a larger slice driving up cost and price. As long as the customers keep up the demand, there is no incentive to work at keeping the costs down. Unfortunately a lot of people screw up the demand curve despite the opportunity cost of doing so. I don’t subscribe to HBO but I know people who are lower income who have admitted to juggling which set of bills to skip paying for the month who have subscriptions to every channel, HBO, Netflix, and Hulu. I’ve never been one to call customer retention and so am part of the problem, but I’m getting closer to becoming a cord cutter.
My fav comment regarding example of hotel charges (specifically $10/day internet)
“It turns out that PPV porn was an attempt to recapture the revenue from rooms only used for an hour by extra marital affairs. First we had Mad Men affairs. Porn killed Mad Men affairs. WiFi killed PPV porn. People who only want to watch Mad Men are killing bundles. It is the great circle of life.”
Gotta love it :)
Am I the only one who finds it questionable that an article praising the cable bundle comes from a company that makes a a good chunk of its money from being part of the cable bundle? Of course, Bloomberg wants you to keep your cable TV. They profit from that, don’t they?