The End of TV and the Death of the Cable Bundle

Two small pieces of news yesterday could make for a big headache for TV.

First, Viacom yanked its 19 channels – including Nickelodeon, MTV and Comedy Central – from DirecTV [..] Big deal, you might say, so DirecTV people can’t watch “South Park” and techies can get a crappy stream of “The View” on their iPad. That’s not a wrong interpretation of the news, but it’s too narrow. The bigger story here is the death of the bundle.

Every year, 100 million homes pay for a bundle of cable channels. Like any bundle, it’s hard to see exactly what they are paying for. That is somewhat the point of bundling – to disguise the true cost of the constituent item [..]

But à la carte would blow up television, which has been the most dependable and lucrative business model in modern entertainment history. The Internet gutted the music industry. Print journalism has been forced to innovate or die – or, sometimes, both simultaneously – in response to the Web. The American movie industry has survived fundamentally because it learned to diversify away from the terms “American” and “movie industry” – most of their revenue now comes from overseas and “merchandise-able” franchises. But the cable bundle is still basically the cable bundle, and it is still growing by hundreds of thousands of subscribers a year. Innovation is an answer to a problem. As long as cable providers don’t have a revenue problem, they have less need to innovate [..]

The Internet is ruthlessly efficient at stripping cross-subsidies and allowing content to shine on its own. (As Jim Fallows has pointed out, newspapers once paid for international coverage with classifieds and cars. Now, if you want classifieds and cars, you go to a classifieds site or a cars site. Bye-bye, cross-subsidy.) 

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Bundling implies mass distribution, 21st century will be about choice, personal selection, personalization.

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July 13, 2012