Why do cable companies bundle their channels?:

…cable TV has always relied on “bundling”—you have to buy a package of channels rather than picking only those you want—in recent years the practice has come under fire, in no small part because the price of those bundles keeps rising. The bundles do, of course, include many more channels than they did a decade ago. But, as Kevin Martin, the former head of the F.C.C., was fond of pointing out, if you’re watching only sixteen channels why should you pay for eighty-five? So consumer advocates have been pushing for a system of so-called “à la carte” programming, expecting that this would drive down prices for consumers.

In fact, it probably wouldn’t. The simple argument for unbundling is: “If I pay sixty dollars for a hundred channels, I’d pay a fraction of that for sixteen channels.” But that’s not how à-la-carte pricing would work. Instead, the prices for individual channels would soar, and the providers, who wouldn’t be facing any more competition than before, would tweak prices, perhaps on a customer-by-customer basis, to maintain their revenue. That doesn’t necessarily mean that Bravo would suddenly cost fifteen dollars a month, but there’s little evidence to suggest that à-la-carte packages would be generally cheaper than the current bundles. One recent paper on the subject, in fact, estimated the best-case gain to consumers at thirty-five cents a month. But even if it wasn’t a boon to consumers an à-la-carte system would inject huge uncertainty into the cable business, and many cable networks wouldn’t get enough subscribers to survive. That’s a future that the industry would like to avoid.

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