Broadcast, Broadband and Bundle Bloat

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Consumers aren’t the only ones who are force-fed bundles of pay-TV channels they don’t want just to get the ones they are interested in. Cable providers are in the exact same position.

Consider, for example, the recent dispute between Cablevision and Viacom. Cablevision wanted to carry Viacom’s popular “must-have” channels aimed at children (Nickelodeon), young adults (MTV), African-American audiences (BET) and comedy audiences (Comedy Central). Viacom told Cablevision that to get these channels it also had to purchase and place on its entry-level tier more than a dozen unpopular channels (such as CMT Pure Country, TeenNick, and VH1 Soul). Viacom doesn’t care that VH1 Soul’s ratings declined by 75 percent from 2010–2012. Viacom simply told Cablevision that if it wanted only the popular channels, it could have them — for one billion dollars more than the price of the entire bundle. The cable industry calls this practice “wholesale bundling.” But antitrust law has another term for it: illegal product tying. It’s easy to see why large programmers like Viacom are so enamored of the wholesale bundling model. Because its fees are not directly related to the size of each channel’s viewing audience, programmers can earn healthy profit margins simply by repackaging low-cost content and forcing distributors to carry these low-demand channels on their entry-level tier.


Broadcast, Broadband and Bundle Bloat