Hazlett on "A La Carte" Cable TV
A la carte cable TV doesn't serve consumers best says Professor Thomas Hazlett in an editorial commentary appearing in Barron's. Hazlett points out that families pay less for the individual cable channels they like because standard packaging practices bundle a wide array of program choices at a lower cost than the consumer would pay for selected channels alone. "The beauty of bundling is that it allows operators to set one price for one big package, receiving payments from diverse individuals who subscribe for completely different reasons. That allows distinct tastes to be served, network costs to be shared and costs lowered for all," says Professor Hazlett.
Everything's on the Menu, Barron's, September 18, 2006. By Thomas W. Hazlett.
"Cable-TV channels aren't marketed one-by-one like loaves of bread for a crucial reason. Once investors sink the capital to physically create cable systems (or launch satellites) and buy program channels, it costs nothing to deliver an extra channel to a given subscriber. Indeed, it costs more not to, posing a nightmare for subscription managers. And the reason why both established and upstart cable networks oppose a la carte rules is that they require cable channels to spend millions in marketing just to make their content available for viewers.
"The market rationally avoids this expense, supplying big bundles of diverse content and letting customers pick and choose with their remote controls. If regulation forced the industry to absorb the cost of a la carte, they would have less money to spend on developing new programming."