Appeals Court: Bundling Cable Channels Together Isn't Anticompetitive

from the and-it's-outdated-anyway dept

Over the years, one topic that seems to engender extremely passionate responses around here is the question of cable TV bundling. People hate bundled cable TV packages — usually because they hate paying for a bunch of channels they don’t want just to get the four channels they do want. I still tend to think this complaint is overstated — if the cable guys priced things out a la carte, the pricing would basically come to the same thing anyway (the channels you do want would be super expensive, and the ones you don’t would be pretty cheap or free with other channels). Either way, the complaint also seems increasingly antiquated in an internet world. More and more TV shows are moving to the web anyway (through both authorized and unauthorized means). While it’s certainly not perfect yet, you can create your own a la carte solution for many TV shows/channels.

Still, some folks sued over this bundling, claiming that it was anti-competitive. However, as Eric Goldman alerts us, an appeals court has upheld a lower court decision and outright rejected the idea that bundling is an antitrust issue. The court points out that “tying” arrangements are only illegal if they lead to clear anticompetitive behavior and consumer harm, but that’s missing here:

The complaint does not allege that Programmers’ practice of selling “must-have” and low-demand channels in packages excludes other sellers of low-demand channels from the market, or that this practice raises barriers to entry into the programming market. Nor do the plaintiffs allege that the tying arrangement here causes consumers to forego the purchase of substitutes for the tied product…. Nothing in the complaint indicates that the arrangement between the Programmers and Distributors forces Distributors or consumers to forego the purchase of alternative low-demand channels.

The court notes that the only real complaint is that the contract between the parties limits what kinds of offerings can be made by the cable companies, but the court notes that third parties suing over others’ contracts that limit some actions “is not sufficient to allege an injury to competition.”

I think it’s pretty silly that cable companies haven’t innovated to the point that a la carte offerings are regularly available. I recognize that the issue here is more about programmers requiring the bundles to get the “must have” channels, so the cable providers are a bit hamstrung, but sooner or later the cable companies need to convince the programmers that lumping stuff together just pisses off consumers, and they might as well offer up an a la carte solution instead.

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Comments on “Appeals Court: Bundling Cable Channels Together Isn't Anticompetitive”

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Pitabred (profile) says:

Bundling isn't anticompetitive

The bundling isn’t anticompetitive, it’s the lack of competition and the amalgamation of businesses from different industries (Comcast+NBC, etc.) that is.

What pisses me off is that due to that control, it means if I want a DVR I need to buy the cable co’s POS equipment made by the lowest bidder, build a system that uses the almost useless CableCARD standard (windows only, natch), or only record OTA stuff.

Guess that’s why I’m happy with an antenna, BitTorrent and Netflix any more…

Pwdrskir (profile) says:

Monopoly = Anticompetitive

The locked down market is the problem, not the choices you get on limited providers.

Tax payers have subsided building out the “infrastructure” by allowing the builder of said infrastructure a monopoly. The companies do not own the infrastructure anymore than they own the air.

They have a return on their investment and been given a profit for their efforts, now the public needs to be given a Real choice by opening up OUR infrastructure and OUR airwaves to competition for the good of all.

Melissa Ruhl (profile) says:

Not bundling could mean more revenue

Like sehlet, I canceled my cable because I couldn’t get the channel I wanted.

I’ve always thought that if they didn’t bundle (but also didn’t do what Mike suggested and raise prices on desirable channels) more people would purchase channels. More people purchasing channels means more happy conversation, which is the most effective kind of advertising out there.

I just don’t get how the bundling method makes economic sense for them.

Anonymous Coward says:

Re: Re: Not bundling could mean more revenue

Think of it this way you could buy channels by corporate ownership-

NBC/Universal–USA Network, Syfy, Chiller, G4, CNBC, MSNBC, Bravo, qubo, Telemundo Television Studios, The Weather Channel, ShopNBC, Hulu, A+E Networks (15%)

Disney/ABC–Disney, Lifetime, A+E Networks (42.5%), ESPN, ABC Family

Discovery Networks– Discovery Channel, TLC, Animal Planet, OWN, Discovery Civilization, Science, The Hub, Military Channel, Planet Green , Discovery Fit & Health

Viacom (CBS)– Comedy Central, Logo, BET, Spike, TV Land, Nick@Nite, Nickelodeon, TeenNick, Nick Jr., MTV, VH1, MTV2, Tr3́s, CMT, Palladia

Big Ten Network (51%, with the Big Ten Conference), Fox Business Network, Fox College Sports, Fox Sports Net (some affiliates owned by DirecTV Sports Networks), Fox Movie Channel, Fox News Channel, Fox Soccer, Fox Soccer Plus, Fuel TV, FX, National Geographic Channel (with the National Geographic Society), Nat Geo Mundo (with the National Geographic Society), Nat Geo Wild (with the National Geographic Society), Speed (TV channel)

That covers most of the cable universe on my system. Lots of shopping channels would go out as free.

IrishDaze (profile) says:

Re: Re: Re: Not bundling could mean more revenue

Because of this, we’ll never have al a carte cable.

Fine, CableCo, you don’t want to sell me al a carte channels. Why not sell me the same bundles YOU pay for? It makes me insensible with rage that I cannot tell CableCo “I’ll take Discovery Networks + NBC/Universal for $50/month, pls.”

What also infuriates me is that I can’t go to TNT’s or USA’s website and pay them a monthly/yearly/per-season fee to watch their programs from their site (even though they’re available!) because of their contracts with the CableCos.

The only way I can watch their programs at their sites is to have my cable bill in my hand to log on . . . and I rent a condominium with group-maintenence-fee-purchased basic cable. No one can tell me how to get a copy of the bill so that I can do this, and the CableCo won’t tell me what I need to know to do so even though they know enough to send a technician to do a repair.

In what freakin’ universe does it make sense for TNT/USA et al to turn down my money to watch their already-made programming simply because I want to pay it to them and not to a CableCo?

It’s their contracts with the CableCos that prevent this. The CableCos are so petrified of a changing market that, if TNT/USA et al want their channels carried by the CableCos, then the CableCos insist that they not make their programming available by other methods.

Add bandwith caps to this mess, and the injustice is breathtaking because every.singe.CableCo.does.this.crap — So they all get away with it and we have zero recourse except cutting the cord and doing without or with breaking the law.

When breaking the law makes more sense to your prospective customer base than continuing to deal with you and your crap, you should wake.the.hell.up.

Of course the CableCos (and their shills) and lawmakers keep having the unmitigated gall to act confused/suprised/outraged/disappointed with the concept of cord-cutting and piracy.


Anonymous Coward says:

People are complaining about the wrong thing. What needs to be done is we need to demand that government established cablcco monopolies get abolished. and if any court stands in the way we should bombard the streets by the millions every day until the judicial-executive-legislative complex abolishes their government established monopolies.

Anonymous Coward says:

Re: Re:

Running to the government to solve the issue in my opinion is not that good.

Pirates will decide this and will find a way to route around the artificial monopolies created.

I have absolute confidence that by hook or by crook those monopolies will end, naturally, we just have to wait some more decades and hope those monopolies do everything in their power to stop it creating very nasty situations that makes everybody turn against them.

explicit coward (profile) says:

Bundled Entertainment

Entertainment always comes bundled – even if it doesn’t show. That’s the way the producers finance the stuff. Take movies:

Say a company produces 10 movies a year. One of these ten movies is a box-office-success, two barely break even and the rest is just crap nearly no one wants to see – these last seven movies still need financing. So, anytime you go to the movies you ain’t just paying for the movie you’re watching, you’re also paying for seven movies you will never watch.

The same can be applied to music or games. The “problem” with entertainment is: You do not know for sure if what you produce is going to make money.

I mean, on one side I’m a little pissed at the fact that I’m partially paying for crap I don’t want (AND I don’t get) whenever I’m going to the movies or buying a DVD. On the other hand I can see why it’s done this way…

Jeremy Lyman (profile) says:

Best for everyone except the customer.

So the court readily admits that the customer is being harmed, but rules that competition isn’t harmed.

So, why then, doesn’t the customer change to a service provider who doesn’t harm him? Perhaps there are no other providers; or perhaps all the other providers abuse customers similarly.

But how could a market consist only of abusive companies? Surely some upstart would enter the field and demolish the existing competition. Unless perhaps there exists some type of monopoly situation, or perhaps the players have calculated that it is more profitable if all providers abuse their customers.

I’m reminded of a scene from “A Beautiful Mind”:

Hansen: Recall the lessons of Adam Smith, the father of modern economics. “In competition ?”
Everybody: “? individual ambition serves the common good.”
John: [after thinking] Adam Smith needs revision.
Hansen: What are you talking about?
John: Adam Smith said the best result comes from everyone in the group doing what’s best for himself. Right? That’s what he said, right?
Hansen: Right.
John: Incomplete. Incomplete, okay? Because the best result will come from everyone in the group doing what’s best for himself ? and the group.
Hansen: Nash, if this is some way for you to get the blonde on your own, you can go to hell.
John: Governing dynamics, gentlemen. Governing dynamics. Adam Smith ? was wrong!

Anonymous Coward says:

Re: Best for everyone except the customer.

Except in this case there is no market. There’s monopoly or duopoly. If you’re a believer in “free market solutions”, why are you talking about companies “abusing their customers”? They are behaving in the way they think bring in the most profits and/or maintains their control. That’s what all companies do. Therefore, you’re saying all companies abuse their customers. I don’t necessarily disagree, but it’s interesting to hear it from someone who seems to be a “free-market” believer.

Jeremy Lyman (profile) says:

Re: Re: Best for everyone except the customer.

Oh sorry, I probably didn’t express myself well enough. While I think that free market and competition can be an excellent way to control certain enterprises for the benefit of the consumer, in many cases it doesn’t pan out. Especially in cases like this where we’ve mixed types of service and confused the reality of competition. Here I think we’ve conflated the monopoly or duopoly enterprise of content delivery with the (potentially) competitive aspect of content subscription.

Much like with electricity providers, I don’t think we should have dozens of companies digging up our public right of way to lay cables to each house, so we have a legitimate case for allowing the monopoly to continue. But we should acknowledge what it is and properly regulate it such that customers can’t be mistreated with no recourse. And again, like electricity supply, customers should be able to choose their content providers as entities separate from the regulated content deliverers.

I guess the original point I was trying to make was that I think it’s ridiculous that the judge didn’t find any harm to competition, because there isn’t any competition (at least from my perspective as a consumer) as a result of vertical integration that takes the legitimate use for a monopoly from one enterprise and applies it to a separate one. Seeing that customers are complaining, acknowledging that they’re being hurt and not doing anything about it seems like a failing of the legal system, either in the law or the judiciary.

And yes, before anyone points it out, I am a layperson and don’t really grasp the fine points of what they’re arguing. But we shouldn’t cultivate an opaque legal system that seems arbitrary and unjust to the general population. I want simpler terms of service, dammit, how else will I know if my actions violate them?

vastrightwing (profile) says:

Who cares?

Meh, I don?t care. I used to, but now due to the economy and price, I?ve simply been without pay TV for years. I wanted to get AMC for the show Mad Men, but have since discovered a way to get the show with a 1 day delay for a lot less than the $30/month required to get that one channel.

Consumers are already changing their habits so pay TV with its bundled channels has a limited lifespan already. I?m sure the cord cutters are still going strong and the trend will continue until there are not enough cord keepers to pay the bills.

Davey says:

There might be some truth to the argument that selling one or 2 channels ala carte doesn’t make sense for their business plan. But it wouldn’t have to be done that way, even though it’s the way the story is always framed.

They could, for example, sell packages with points: for 30 bucks, say, you get 100 points. HBO costs 20, basic cable channels cost 1 or 2, stuff like ESPN costs 15, ethnic and special interest or semi-premium channels like Sundance, bloomberg, Current, BBC America cost somewhere in between.

Consumers get choice on channels, cablecos get a floor on subscription income, why wouldn’t everybody except free-riders like ESPN be happy?

Jon B. (profile) says:

“that lumping stuff together just pisses off consumers, and they might as well offer up an a la carte solution instead”

I haven’t commented much lately, and I hate to log in just to (rarely) disagree with Mike…

But this statement isn’t backed up by anything. There’s no guarantee that a la carte would be cheaper for most people. The service would definitely be more expensive for cable companies to provide – the question is how much. If you like 30 of your 60 channels, buying those 30 channels 1 or 5 at a time would probably be more expensive. On top of licensing, there’s a large technical cost for the cable company to implement a system where your channels are artificially limited so that those other 30 channels are turned off, and a lot of overhead in the billing department as well. Remember, this is cable… all that data is broadcast over the cable anyway. All they’re doing is artificially limiting it, and adding the artificial limit adds cost.

Sure, it might be cheaper for the people that only want 5 of those 60 people, but those people are dropping cable for netflix and hulu anyway.

tl;dr: I only view 10 websites a day, but I still pay for all of them and that’s good. Why should cable be different?

The future of TV is internet anyway

grammsH (profile) says:

Bundling, (Comcast)

I called Comcast about the rate of my bill yesterday, I wanted somehow to cut back. I am on a fixed income and everything is going up and cannot afford to bundle any longer. There were no options, the represenative state if I cut back it would cost me more.

I told her this made no sence. So I either have to pay the bill, or lose all my hook ups. TV,Computer and Phone.

This is entrapment. There has to be someone somewhere that can stop this nonsence. An elderly person with the amount of money I draw can even afford the rent, groceries, elec.and etc. Are we just somehow just suppose to die, while the government sends all our money to help other countries.

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