Why Unbundling Cable Would Not Save You Money

Unbundling cable channels wouldn’t make consumers materially better off. The most likely result would be people paying about the same amount for fewer channels.

The cost of maintaining the wires to your house and keeping the lights on at the cable company wouldn’t go down, even as you order fewer channels. After all, it costs just as much for the cable company to deliver four channels as it does 189. There is good reason to expect your cable company to raise your basic service charge to cover those expenses, offsetting part of your per-channel savings. And consider how the cable channels would react to losing so many subscribers. The networks make money in two main ways: They get per-subscriber carriage fees from the cable companies that distribute them, and they sell advertising. Ad revenue would fall a little, as some viewers would drop channels they used to watch occasionally. The number of customers subject to carriage fees would plummet as consumers chose to order fewer channels. Meanwhile, each cable channel would know its remaining subscribers are mostly people who actually watch the channel, meaning they have a high willingness to pay. Knowing this, they would raise carriage fees -- a lot.