You Can’t Kill Cable Bundling Without the Premium Networks

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It is a perpetual complaint that cable television is expensive out of proportion to its value, and that it’s expensive because cable bundling means customers are subsidizing channels that they don’t actually want to watch. That structure’s justified by the idea that it provides consumers with choices, even if they’re choices that customers are unlikely to ever make use of. The case against bundling is that even if it would kill some channels and make the remaining ones somewhat more expensive, is that it would let consumers exercise choice up front, paying for what they want in the combinations that they choose—to get BBC America, for example, without buying it with a tranche of other programs, or to get HBO without buying a bunch of other channels first.

And so I’m somewhat less optimistic about a new product called Aereo that’s being heralded as a cable-killer. The idea is that the service, which is premiering in New York in March, would let people rent a tiny antenna that would allow them to stream locally available television channels to any device they want. It’s not entirely clear whether Aereo is legal, something that one would imagine will have to be cleared up before the March 14 launch date. But even if it is legal, I wonder if it’ll actually be in a position to kill cable entirely.

The reason? Aereo’s only got the ability to get people access to the broadcast networks and local channels. It can’t unscramble cable networks. Hulu already gives folks access to the core programming on the broadcast nets, admittedly, with a day delay, and has become vastly more accessible on devices like iPads and streaming on set-top devices, so there’s already a service that’s similar, if not identical, on the market. But their lack of access to programming from some cable channels and all premium cable channels means that Hulu can’t be a complete substitute for a cable subscription. And even for folks who are willing to wait longer, Netflix isn’t either. People like their Bravo, and their ESPN, and their HBO, and their Showtime. As long as they can’t get them in a timely fashion any other way, I think people will continue to pay for cable to get access to those networks, and those shows that have a patina of high value.