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Is Unbundling Cable Actually a Good Idea?

May 27th, 2014 by Associate

Every day more and more Americans do the previously unthinkable—they unplug.  Tired of paying exorbitant cable rates for a smattering of channels they generally don’t watch, these brave souls simply stop watching altogether.  The current cable packages are borderline laughable—offering less than 20 channels or over 500.  One of the more popular solutions to the high price of cable is to allow customers to choose their channels a-la-carte style or “unbundle” the cable packages.  This would (in theory) lower prices, as most people would watch only a few channels.  The only perceived downside of unbundling is the likely death of a significant number of the less-popular channel (although some might argue this “cable natural selection” might not be a bad thing).

However, a recent article from the Upshot—the New York Times’ new version of Nate Silver’s FiveThirtyEight blog—refutes the basic premise behind unbundling.  The article posits that instead of making cable cheaper, the customer might end up paying more money for less variety.  As it’s currently structured, channels do not negotiate with individual consumers, they negotiate with mammoth cable companies for their respective carriage fees.  This naturally limits the amount of carriage fee increases.  If unbundled, the most popular channels would know their exact customer base and could substantially raise their carriage fees.  ESPN, the channel with one of the highest current carriage fees, would likely raise their fees dramatically as one of the most purchased channels.

In the end, there seems to be no perfect solution for cable.  As it currently stands, customers are forced to pay for a large number of unwatched channels.  If unbundling ever happens (which is no certainty), customers might end up paying more money for fewer channels.  The current structure seems to provide the most workable solution—high cost but high variety.  However, as more and more options for streaming arrive each year, the argument may become moot.  A-la-carte pricing might evolve naturally through the individual providers—Netflix, HBO,, etc. removing the need for the cable-company middleman.


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