Big Media v. Big Cable

Posted 5 years ago by Michael Estrin

Hating on your cable company is almost de rigueur for American consumers. The gripe: we pay for too many channels we never watch. That’s called bundling, and a lot of consumers say they’d prefer a switch to ala carte pricing. The assumption among many consumers is that it’s the cable operators who won’t change. But that may not be so. Cablevision is suing Viacom, essentially arguing that the media company is to blame for the bundling that consumers hate.

The New York Times says the case may be a watershed in the debate over bundling.

For decades distributors like Cablevision and programmers like Viacom have found it in their best interest to keep the bundle intact, avoiding the “a la carte” idea promoted by public interest groups.

But the two sides are increasingly at loggerheads over the costs as customers’ bills keep rising and when some viewers are turning to the Web for entertainment. Bundling, part of the bedrock of the television industry, is now a potential target.

“This is most interesting as a break between operators and content providers, most of whom have traditionally argued that bundling is good for them, just disagreeing about the price and who controls the bundle,” said Gene Kimmelman, a former Justice Department antitrust lawyer.

Bloomberg’s analysis seems to track with the NY Times. The trouble, according to the Bloomberg story, is that the bundling model is breaking apart because we’ve essentially reached a subscription plateau.

Wired seems to think that this lawsuit could mean an end to bundling. But that strikes me as wishful thinking. Let’s say that Cablevision wins. And let’s say they do it in two years, which is actually fast in the legal world. Where will technology be by then? One of the problems with this titanic media lawsuit is that the parties are litigating a dying business model in a world of rapid change. And as The Atlantic Wire points out, it’s not clear that ala carte media (if that even happens) will trickle down to lower cable bills. In fact, if Cablevision wins it will inherent a different problem: convincing consumers that they should pay for a specific channel, which may or may not be available online. That will make for a tougher market place, and presumably increase the need for cable companies (or the channels themselves) to advertise.

Then, the question becomes how much will you be willing to pay for this?

More importantly, will that generate enough money to keep The Daily Show in production? Or, will advertisers be asked to pick up the slack?