Megan McArdle refutes the idea that forced bundling by cable television providers (that is, a take-it-or-leave it approach that requires subscribers to pay for 180 channels they don’t want in order to get the twenty they do) really harms consumers. Instead, she argues, “The real problem with cable pricing is not bundling; it’s that cable companies have cozy local monopolies because of a combination of political influence, and the natural reluctance of municipalities to tearing their streets up.”
For many of us, that monopoly advantage is offset by the availability of multiple cable providers, multiple satellite providers, and the launching of the long-awaited service from telephone companies via fiber optic cable. Unfortunately, though, that competition is increasingly offset by exclusivity contracts.
For example, I’ve been a subscriber to DirecTV since moving to the DC area five years ago. Its pricing is competitive with cable and, presumably, limits the ability of the local cable providers to raise prices. Additionally, it comes with the option to subscribe to NFL Sunday Ticket, a package that allows me to see every regular season NFL game (with some annoying caveats).
A few weeks ago, we got FiOS (fiber-optic service) Internet connectivity from our phone provider, Verizon. It comes with the ability to add, as part of a bundling arrangement, what’s reportedly superb high definition television through the same cables. It would not only be cheaper than DirecTV’s product but have much better networking ability than available with DirecTV’s rather inferior HD-DVR system.
Here’s the rub: I’d have to give up NFL Sunday Ticket, which is exclusively licensed to DirecTV, at a very high premium, by the NFL.
Now, I don’t begrudge the NFL the right to sell its product at the highest profit they can achieve. And, in theory, it’s no different than them showing some games, including the Super Bowl, on cable channels that some people can’t get. After all, there’s no right to watch every Dallas Cowboys game (unless you really stretch the Pursuit of Happiness concept). Still, the arrangement leaves me with the choice of staying with a suboptimal television provider, paying twice for redundant service, or missing out several times a year on a very precious, limited commodity (each team is guaranteed only 16 regular season games).
Most major college and professional sports bodies have similar arrangements with some provider. It wouldn’t surprise me if, at some point, other programming moved to a similar model. The end result is a huge drop-off in choices available to consumers.