Apparently so, according to writer Derek Thompson’s well researched and engagingly presented, but unfortunately misguided, article about pay TV pricing (“Prisoners of Cable“) in the latest issue of my favorite magazine, The Atlantic. He acknowledges that the seven largest Big Media companies — including News Corp, Viacom, Disney, and Time Warner — “use their oligopolistic power” to give cable and satellite customers a simple choice: either buy “a bloated offering of channels at an arrestingly high price” or go without. “Cable’s proposition to consumers is simple: if you want the new, good, TV shows, you need the bundle.” That’s unfair, right? Not to Thompson. The system that makes people pay for channels they don’t want also gives us classy fare including HBO’s Game Of Thrones and AMC’s Mad Men and Breaking Bad. “Indeed,” Thompson says, “it’s no accident that as pay-TV has proliferated, and costs have risen, we’ve also entered a golden age of television.” And even though “as a monthly fee, cable feels like a rip-off…as hourly entertainment, it’s not.” The proof: The bundle only costs 20 cents an hour for the average four-person home that watches as much as four hours a day. The kicker: “more than 100 million households still think the price is worth paying.”
Boy, is that a stretch. Millions of TV addicts begrudgingly overpay for the cable bundle because they lack a realistic alternative. It’s no wonder that pay TV ranks third to last among the 47 industries tracked by the American Customer Satisfaction Index. Is it a bargain? Perhaps, if you’re in that average family. But not so much for a single person, a family that watches far less than four hours a day, anyone who doesn’t like sports (the most expensive programming) — and certainly not for those who are struggling to make ends meet. That’s a serious, and growing problem. While median incomes have declined 8.7% over the last 11 years, the inflation-adjusted cost of pay TV has risen about 87.1%, Bernstein Research’s Craig Moffett notes.
The biggest weakness in Thompson’s argument, though, is his suggestion that it’s OK for Big Media to insist that millions of people subsidize channels that they don’t watch because it has resulted in a golden age of television. The claim should trouble anyone who believes that television should be governed by market forces including consumers who are empowered to pick the channels they want. It’s possible that such a change would result in too little programming for kids, or minorities, or the cultural elite. But it might not, especially in a period when digital media are finding ways to accommodate all kinds of niche services. And if a market-based system didn’t support important programming, then it would be a lot fairer — and probably less expensive — to address the problem directly. We’re already discussing whether taxpayers should help to subsidize PBS and Big Bird. Why not also debate whether 100 million pay TV customers should be required to subsidize ESPN2 and The World Series of Poker?