4. Read the article “Cord-Cutting Still Doesn\'t Beat the Cable Bundle” from WIR

Question

4. Read the article “Cord-Cutting Still Doesn't Beat the Cable Bundle” from WIRED Magazine at

https://www.wired.com/story/give-me-a-bundle-for-cord-cutters/

a. Towards the end of the “Follow the Money” section, the author writes, “It turns out, oddly enough, that things cost money…” One of the main arguments for cable bundling is that the revenue generated from the high-viewership channels (e.g. ESPN) will cover the costs for the low-viewership channels (e.g. The Cat Channel). This would suggest that bundling is done for cost purposes.

If we accept that a part of bundling is done for cost purposes, does it preclude the use of bundling for price discrimination also? How might we know that a pricing strategy is done for cost purposes versus discriminatory purposes?

b. The author lists several streaming plans as examples of alternatives to the traditional cable model. Do you think that such plans can remove the potential for price discrimination that bundling provides? Explain.

Explanation / Answer

a.In my opinion, bundling is not done for cost purposes. If it was done for the byundling purposes then why channels which are free to air are bundled with some subscription package and when subscription gets over even free channels are not shown. However, it is also a fact that more customised channel offerings may ask for higher money but the basket of channels on offer is different hence it is discriminatory.

It is very evident from the facts given in the article that service providers inspite of knowing customer choices make plans different. For Example If a person is a sports enthusiast and subscribes for sports channel package, then also a person will not get all sports package. Channels may be bundled with other package or separately and ask for to up package. Local cable operators also charge same money but show different channels to different people in an area. This shows that prices are discriminatory and not based on costing mechanism but on charging abnormal profits.

b.No. I dont think so. Because that will need duel subscription. Internet and local cable. Internet has become almost mandatory and hence that cost can be neglected but againg even to see any paid content customer has to pay. Yes it has some merits as customer will only pay for what he/she prefers to watch online. But we need to understand that Channels like Netflix do not offer only a particular web series or content. We still need to subscribe for a month or so. Also prices charged by popular net content providers is also high.

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