…explore the potential effects of not only making cable tv a la carte, but also requiring that television content providers allow choice in how the consumer pays for the service – either an advertisement based system or a fee that would eliminate the commercials. Additionally, require that the consumers be given a choice of types of advertisements they would be exposed to (I could choose for example an advertisement-based model, but that I would not want to see ads for children’s toys or cereal, and that I wanted to see no political ads).
Here is my earlier post on a’la carte cable. The second question is, in effect, whether a cable company should be allowed to own TiVo and similar providers. Yes, and Grossman and Hart suggest such mergers can encourage joint investments with value specific to that relationship, in this case perhaps computer-TV linkages. By the way, the net effect of TiVo will be more shows with ads; if they add commercials to The Sopranos, the people who hate ads can take them out themselves.
Buying and selling specific ads? The people who want to zap children’s ads for sugar are precisely the homes the advertisers wish to reach; I’ll bet the Coasian equilibrium keeps the ads running but involves parental quotas on TV watching.
#08 in a series of 50.
Awesome. Thanks, and let me add that I think you going through 50 is a great idea.
Your response on the children’s cereal, to me, seems not to apply for political advertising. I would think this would greatly reduce the costs of political campaigns, but not reduce participation (quite a bit of politcal ad’s purpose is to keep the other guy’s supporters home). It might reduce the amount of information available to voters, but in general tv ads signal to noise ratio is so bad taht I am not sure it reduces the quality of information to voters.
Specifically on ads to children’s cereals or toys, I think allowing parental choice would increase the incentives for ad agencies not to engage in the sort of ad that trys to influence children to influence their parents to spend money.
Tyler,
I wonder if in a couple of months you couldn’t advertise publicly a solid 12-hour blog-off. It’d generate an enormous amount of interest, I think. Just blog constantly and let others ask questions. See how much interesting stuff you can churn out. You might even be able to make some money off of it.
I don’t have evidence for this, but I think that forcing customers to buy bundled channels allows for better diversity in programming. A niche channel couldn’t survive if viewers were able to decline it–or it would be very expensive. I’m willing to pay so that a channel I don’t watch can survive if in return the viewers of that channel have to pay so that the channel I do watch can survive. I think it all evens out.
No political ads would be unconstitutional according to precedents involving Jehova s Witness and communist party
I’m with you on the a la carte advertising bit – intuitively the idea of advertising is that your audience doesn’t have a choice.
What is a Coasian equilibrium? Nothing obvious popped up on Google/Wikipedia…
Who cares if it’s a disaster for the current industry?
Shows leave TV all the time without enough viewers, and
I doubt many people would cry themselves to sleep if the
corps that support the WB, or whatever it’s now called,
finally, gratefully pulled the plug.
In my mind, it’s a tying arrangement and per se illegal.
When you’ve got people – say, my grandparents – FORCED to
buy ESPN and MTV and other very expensive channels, that
they NEVER watch or would desire to watch, solely in order
to watch USA Network.
The technology exists for a la carte. let people order
what they want and pay for each channel individually.
It’s true that ebfore long, we’ll only care about specific
content that we can order, or watch, on demand via the Inernet,
but why wait for that?
Superdestroyer –
You’re right. That’s how the industry began and probably how it
had to be. But it no longer needs to be that way.
[I'm no expert, but the way the industry started was a bit of
chicken and egg, right? If you build it, they will come.
There's no point in having cable channels without the plant
to the home and vice versa. Wasn't it was TCI that solved
the problem, by laying the cable AND investing in the content?
Then the technology probably did not exist to have a la carte.
And it was a fledging industry. It probably wouldn't have
gotten off the ground, ever, if it were all pay per view.
Though there are some success stories (HBO and Showtime, etc)
there probably weren't enough people willing to pay for specific
content, without knowing what they were getting.]
Things are different now.
1 million subscribers is just under 1% of US households. Sure,
slightly over 1% of households with cable or satellite, but
that would definitely expand with a la carte offerings.
The channel would have the ability to determine what the
market will bear for it’s content (ratings and viewership
are pretty well known), and they’d likely be able to collect
more of the direct advertising revenues.
Or we can stay how it is now, with MTV shoving MTV2 and MTV3
… and MTV8 down the public’s throat, MEANWHILE hoarding
precious (clearly becoming less so) bandwidth that perhaps could
be more useful for other services….
Any value that cable companies lose from services like Tivo due to fewer eyeballs they can make up for by selling market intelligence. Do you record American Chopper, Monster Garage and motorcycle movies? If so, you can: at best expect to see a Harley Davidson advertisement in the programming menu of your recording device; and at worst, expect to receive ads from local motorcycle dealers in your Gmail and USPS mailbox. This is, in my mind, the best and/or worst reason to allow cable companies to offer “Tivo like† services, depending on your viewpoints.
Would it be possible to settle these arguments by offering both a la carte service along the (brilliant) model Tyler lays out, and the current systems and see which survive? Or if the combination somehow produces more “offspring” that better serves viewers? If the technology and infrastructure is there to support it, why not have more choice and see what wins?
Superdestroyer, I like your point, but these channels would be able to offer free access to gain subscribers. If their content was good, people would pick it up.
I think the software/billing software has to be set up to where consumers can add a channel on the spot. That way they could see the show’s content, i.e. the titles to their shows, and add it once they have decided the content was enticing enough.
Yes, the cost of a popular channel (such as The History Channel or Fox News Channel, for me) would be more than 1/50th of a hypothetical 50 channel lineup that includes QVC, Oxygen, CNN, MSNBC, etc. They are very heavily viewed channels, thus they can command higher prices for their viewing. But their bundling with less popular channels, in effect subsidizes the less popular channels that cannot (and should not) compete in the free market. For a hypothetical $50 cable bill (to keep the math simple!), Fox News Channel will cost perhaps $10, and QVC or CNN might garner $0.07. Let CNN (or QVC or MSNBC) change their programming content if they want to charge the cable companies more for their programming. So, I would pay $20,not the $50 of forced channels that I am being forced to purchase) to watch just what I want to watch, Fox News & The History Channel. Like everything else in this country, we should let the free market dictate.
By the way, when I was 12 in 1983, cable was commercial free…that’s why you paid for it. That’s why we didn’t have it until I was married and 25. But lo and behold, now I get to pay AND get to watch commercials. It’s ridiculous, but you know what, it’s the free market for better or worse. Intilenough of us complain (ie, stop paying), it will only go up. I wonder if satellite radio is headed that direction.
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