7 ms·

Everyone thinks they want a la carte, but (most) everyone is wrong. Bundling is generally better for consumers and producers. https://cdixon.org/2012/07/08/how

Everyone thinks they want a la carte, but (most) everyone is wrong. Bundling is generally better for consumers and producers. https://cdixon.org/2012/07/08/how-bundling-benefits-sellers-and-buyers https://cdixon.org/2012/07/08/how-bundling-benefits-sellers-... Stratechery also has written about this

kangaroozach 6y ago
In aggregate sure, but individuals only care about optimizing their own purchase. Ie more choice more better. Personally I was pissed when my reward for early evangelization of YoutubeTV was a Hike from $35 to $50. But now that it’s $65, I’m donzo. This will take people back to the days of torrents and piracy.
- edoceo 6y ago
  Back to?
newbie789 6y ago
That's an interesting perspective, but it kind of looks like a lot of graphs saying "You should pay for stuff you don't want because otherwise it would incentivize the sellers to price gouge you for the stuff you do want" I'm kind of confused, if it's an adversarial relationship where the seller is going to extract as much money from you as possible in either scenario, wouldn't some consumers prefer to pay specifically to starve out content they'd prefer not to see? Maybe I'm not understanding this page, but it looks like it's "good" for me because instead of paying $9-10 for the History Channel alone I'll be paying $11.70 for History Channel + ESPN (which I will literally never watch)? I'm not a calculus genius but I'd prefer to spend less money and only have what I want. This model assumes that I'd be willing to spend $3 per month on ESPN, but how does the graph look if I were willing to spend $0 per month on it? Or hell, since pricing is arbitrary, I'd like to pay -$3 per month as a courtesy for having to scroll past content I genuinely do not want to consume let alone subsidize?
- s17n 6y ago
  You aren't going to be able to spend less money though. Since there's zero marginal cost to adding extra channels, you should assume that the price you're getting charged isn't actually based on the number of channels you subscribe to. A better way to think about bundle pricing is that the channels you really want cost $50, and they throw in a whole bunch of other crap for free. Why turn down free stuff?
  - lotsofpulp 6y ago
    People don't turn down free stuff. It's just that they no longer value the content provided via TV channels at the price they are asking. The fundamental problem is content that used to be delivered via TV is no longer worth what it once was.
    - s17n 6y ago
      If that's the case, then the prices should go down for bundled content (and this does in fact appear to be what is happening). A la carte makes no sense.
  - Ruthalas 6y ago
    The parent comment lists a specific reason why they'd turn directly the 'free' stuff. It requires more effort to then access the content they want to get to when they have to navigate around the cruft. Whether that factors much into your personal value assessment or not, that is a valid downside to having a bunch of extra channels you don't intend to watch.
  - newbie789 6y ago
    If those channels are free (and by that reasoning, not actually factored into the price of my package) then why am I unable to get individual channels or create my own bundle? Either I'm subsidizing stuff that I don't want to watch, or I'm not. Is your point that I can't spend less because... they're going to get $50 out of me either way? Except that's impossible because there is no other way so there's literally no way of knowing a theoretical cost so it's safest to assume it's going to be $50 or more?
Analemma_ 6y ago
Thank goodness I have economists around to tell me I'm wrong about my own buying preferences.
- FeepingCreature 6y ago
  The economists are wrong about economics too. That article is an absurdly oversimplified model. In the real world, the networks would find some way to diversify between the $3 and $10 channel offerings, letting them get $3 from the $3 person and $10 from the $10 person. edit: Correction, they do mention this common and widespread approach... in a footnote. Without saying anything about why it wouldn't work.
mkhpalm 6y ago
I'm not sure about other people but I don't "think" I want a la carte, I absolutely know I do. So much so that I don't pay for anything because nobody offers what I'm willing to pay for.
- TylerE 6y ago
  Many of those channels you "don't want" actually subsidize the channels you do want.
  - RHSeeger 6y ago
    At least for me, I find that unlikely. I'm paying a fee for sports channels I have no interest in (because you can't not pay it), I'm buying a bundle that I only want a couple channels in, and those are the channels most people want. I would guess that I fall into the majority that are subsidizing the minority.
    - TylerE 6y ago
      Things like Home Shopping and religious networks pay the cable company for carriage.
  - listenallyall 6y ago
    Further, most channels he does want can only exist in a bundled world, since too few people would pay for that specific channel a la carte
- TulliusCicero 6y ago
  No you don't. It's like saying that you'd be willing to pay for a $2/month Spotify subscription for only the genres of music you want. That's not how the economics work. Going a la carte would mean paying as much as a bundle, for less content. The problem here is that people's mental models are fundamentally self-centered. They imagine paying half or less for just the channels they want. But in total, that would mean media companies getting half or less the revenue, for producing the same content -- since the marginal cost of giving extra channels is basically zero, they don't gain any money back by giving you fewer channels. Now, media companies aren't that profitable, the math simply doesn't work out, they wouldn't be able to actually make all that content. Many channels would simply be cut.
zucker42 6y ago
I'm not a professional economist, but to my eye this assumes that if I'm willing to pay $10 for one channel and $3 for another, I'm willing to pay $13 for both. This seems like a bad assumption especially for media, because since TV channels serve as substitutions for each other; if I watch one I'm not going to watch another. I'm not sure if this simplification preserves the results.
rbritton 6y ago
I’m actually more of a fan of a la carte content than channels. I typically spend $0-100/mo on TV shows and movies, which I strip the DRM from and copy into my permanent collection. In aggregate, I probably spend something comparable to what cable would cost. It’s all content I want with no filler or commercials, and I’m not held hostage by some subscription.
sails 6y ago
This [1] article on the four myths of bundling agrees [1] https://coda.io/@shishir/four-myths-of-bundling https://coda.io/@shishir/four-myths-of-bundling
listenallyall 6y ago
Anti-bundling rants based on subsidizing unwanted channels are illogical. You're annoyed at paying for cable channels you don't watch but OK paying full freight for Netflix where you'll watch less than 5% of the available content? You're subsidizing the other 95%! Or that a-la-carte channel you want, you won't be watching it 24 hours per day so why subsidize programming that's on when you're sleeping or at work? Do you listen to every genre on Spotify? Use every machine at your gym? Drive on every road in your town? Read every article in the local newspaper (if your town still prints one)? Refuse to subsidize! Demand some money back! Its not unbundling you really want, or a-la-carte, it's just a lower price tag.
- FeepingCreature 6y ago
  > Or that a-la-carte channel you want, you won't be watching it 24 hours per day so why subsidize programming that's on when you're sleeping or at work? You have correctly identified the business case for cinema and DVDs.
  - quickthrower2 6y ago
    The cinema business case is “going out” “big screen” and “new release” but this could all be disrupted. It’s not a payg model that attracts people to the cinema and many movie chains have a subscription model!
  - TulliusCicero 6y ago
    And buying DVD's is a terrible value compared to a service like Netflix, so congrats, you just reinforced their point. Like, a single movie DVD/Blu Ray costs about as much as an entire month of Netflix. Unless you're hardly watching any TV shows or movies on Netflix, that's just an awful value.
    - FeepingCreature 6y ago
      I watch less than one movie a month.
    - 6y ago

kangaroozach 6y ago

In aggregate sure, but individuals only care about optimizing their own purchase. Ie more choice more better. Personally I was pissed when my reward for early evangelization of YoutubeTV was a Hike from $35 to $50. But now that it’s $65, I’m donzo. This will take people back to the days of torrents and piracy.

edoceo 6y ago
Back to?

newbie789 6y ago

That's an interesting perspective, but it kind of looks like a lot of graphs saying "You should pay for stuff you don't want because otherwise it would incentivize the sellers to price gouge you for the stuff you do want" I'm kind of confused, if it's an adversarial relationship where the seller is going to extract as much money from you as possible in either scenario, wouldn't some consumers prefer to pay specifically to starve out content they'd prefer not to see? Maybe I'm not understanding this page, but it looks like it's "good" for me because instead of paying $9-10 for the History Channel alone I'll be paying $11.70 for History Channel + ESPN (which I will literally never watch)? I'm not a calculus genius but I'd prefer to spend less money and only have what I want. This model assumes that I'd be willing to spend $3 per month on ESPN, but how does the graph look if I were willing to spend $0 per month on it? Or hell, since pricing is arbitrary, I'd like to pay -$3 per month as a courtesy for having to scroll past content I genuinely do not want to consume let alone subsidize?

s17n 6y ago
You aren't going to be able to spend less money though. Since there's zero marginal cost to adding extra channels, you should assume that the price you're getting charged isn't actually based on the number of channels you subscribe to. A better way to think about bundle pricing is that the channels you really want cost $50, and they throw in a whole bunch of other crap for free. Why turn down free stuff?
- lotsofpulp 6y ago
  People don't turn down free stuff. It's just that they no longer value the content provided via TV channels at the price they are asking. The fundamental problem is content that used to be delivered via TV is no longer worth what it once was.
  - s17n 6y ago
    If that's the case, then the prices should go down for bundled content (and this does in fact appear to be what is happening). A la carte makes no sense.
- Ruthalas 6y ago
  The parent comment lists a specific reason why they'd turn directly the 'free' stuff. It requires more effort to then access the content they want to get to when they have to navigate around the cruft. Whether that factors much into your personal value assessment or not, that is a valid downside to having a bunch of extra channels you don't intend to watch.
- newbie789 6y ago
  If those channels are free (and by that reasoning, not actually factored into the price of my package) then why am I unable to get individual channels or create my own bundle? Either I'm subsidizing stuff that I don't want to watch, or I'm not. Is your point that I can't spend less because... they're going to get $50 out of me either way? Except that's impossible because there is no other way so there's literally no way of knowing a theoretical cost so it's safest to assume it's going to be $50 or more?

Analemma_ 6y ago

Thank goodness I have economists around to tell me I'm wrong about my own buying preferences.

FeepingCreature 6y ago
The economists are wrong about economics too. That article is an absurdly oversimplified model. In the real world, the networks would find some way to diversify between the $3 and $10 channel offerings, letting them get $3 from the $3 person and $10 from the $10 person. edit: Correction, they do mention this common and widespread approach... in a footnote. Without saying anything about why it wouldn't work.

mkhpalm 6y ago

I'm not sure about other people but I don't "think" I want a la carte, I absolutely know I do. So much so that I don't pay for anything because nobody offers what I'm willing to pay for.

TylerE 6y ago
Many of those channels you "don't want" actually subsidize the channels you do want.
- RHSeeger 6y ago
  At least for me, I find that unlikely. I'm paying a fee for sports channels I have no interest in (because you can't not pay it), I'm buying a bundle that I only want a couple channels in, and those are the channels most people want. I would guess that I fall into the majority that are subsidizing the minority.
  - TylerE 6y ago
    Things like Home Shopping and religious networks pay the cable company for carriage.
- listenallyall 6y ago
  Further, most channels he does want can only exist in a bundled world, since too few people would pay for that specific channel a la carte
TulliusCicero 6y ago
No you don't. It's like saying that you'd be willing to pay for a $2/month Spotify subscription for only the genres of music you want. That's not how the economics work. Going a la carte would mean paying as much as a bundle, for less content. The problem here is that people's mental models are fundamentally self-centered. They imagine paying half or less for just the channels they want. But in total, that would mean media companies getting half or less the revenue, for producing the same content -- since the marginal cost of giving extra channels is basically zero, they don't gain any money back by giving you fewer channels. Now, media companies aren't that profitable, the math simply doesn't work out, they wouldn't be able to actually make all that content. Many channels would simply be cut.

zucker42 6y ago

I'm not a professional economist, but to my eye this assumes that if I'm willing to pay $10 for one channel and $3 for another, I'm willing to pay $13 for both. This seems like a bad assumption especially for media, because since TV channels serve as substitutions for each other; if I watch one I'm not going to watch another. I'm not sure if this simplification preserves the results.

rbritton 6y ago

I’m actually more of a fan of a la carte content than channels. I typically spend $0-100/mo on TV shows and movies, which I strip the DRM from and copy into my permanent collection. In aggregate, I probably spend something comparable to what cable would cost. It’s all content I want with no filler or commercials, and I’m not held hostage by some subscription.

sails 6y ago

This [1] article on the four myths of bundling agrees [1] https://coda.io/@shishir/four-myths-of-bundling https://coda.io/@shishir/four-myths-of-bundling

listenallyall 6y ago

Anti-bundling rants based on subsidizing unwanted channels are illogical. You're annoyed at paying for cable channels you don't watch but OK paying full freight for Netflix where you'll watch less than 5% of the available content? You're subsidizing the other 95%! Or that a-la-carte channel you want, you won't be watching it 24 hours per day so why subsidize programming that's on when you're sleeping or at work? Do you listen to every genre on Spotify? Use every machine at your gym? Drive on every road in your town? Read every article in the local newspaper (if your town still prints one)? Refuse to subsidize! Demand some money back! Its not unbundling you really want, or a-la-carte, it's just a lower price tag.

FeepingCreature 6y ago
> Or that a-la-carte channel you want, you won't be watching it 24 hours per day so why subsidize programming that's on when you're sleeping or at work? You have correctly identified the business case for cinema and DVDs.
- quickthrower2 6y ago
  The cinema business case is “going out” “big screen” and “new release” but this could all be disrupted. It’s not a payg model that attracts people to the cinema and many movie chains have a subscription model!
- TulliusCicero 6y ago
  And buying DVD's is a terrible value compared to a service like Netflix, so congrats, you just reinforced their point. Like, a single movie DVD/Blu Ray costs about as much as an entire month of Netflix. Unless you're hardly watching any TV shows or movies on Netflix, that's just an awful value.
  - FeepingCreature 6y ago
    I watch less than one movie a month.
  - 6y ago