The cable bundle is under increasing popular assault these days, at least as measured by Web diatribes and water-cooler complaints. Nobody likes to feel forced to buy more than they want, and cable television sticks us with eye-popping bills for hundreds of channels that we couldn’t possibly watch even if we wanted to. [...]
Your monthly TV bill—if you belong to one of the 83 percent of U.S. households that subscribes to a pay-TV service—is in fact three bundles nestled inside each other. Cable channels (such as TBS) are bundles of shows. Media companies (such as Time Warner, which owns TBS) offer bundles of channels that they refuse to sell one by one. Finally, pay-TV companies—which I’ll call cable companies for short, but which also include satellite companies like DirecTV and telcos like Verizon—bundle and sell the media companies’ offerings. When you pay $80 or so each month for cable, roughly half goes to the cable company to pay for the cost of building and maintaining the infrastructure to transport the content, and the other half goes to the media companies, which divvy it up among channels.
When you turn on your television, there is a 95 percent chance that the channel you tune in to will be owned by one of just seven media companies, such as News Corp (which owns Fox News Channel) or Viacom (which owns Comedy Central). The Big Seven use their oligopolistic power to drive a hard bargain. Cable providers that want to run Viacom’s popular networks, like Comedy Central, must also agree to buy its less popular channels, like MTV2. After dealing with all seven media companies, the cable providers are left with something millions of households will recognize: a bloated offering of channels at an arrestingly high price. The bundle isn’t something Comcast or DirecTV invented to make their customers hate them. It’s something that the largest media companies demand, in take-it-or-leave-it fashion.
But media companies are not the only players with a big stake in the current system.[...]
As for the cord cutters, they should be thanking those families whose monthly cable bills enable the production of the shows they love to watch on Netflix or Hulu. Today’s pay-TV subscribers are in effect subsidizing the cord-cutter experience by paying top dollar for first-run programming, while the Cordless soak up the offerings more cheaply in later windows. Without cable, there wouldn’t be HBO Go. There might not even be HBO. Great TV only seems cheap to the Internet’s enfants terribles because media companies insist on charging for it elsewhere—and more than 100 million households still think the price is worth paying.
