The U.S. Court of Appeals in Pasadena would have turned pay TV upside down today if it had sided with consumers in a suit that took on virtually every major company in the business including NBCUniversal, Viacom, Disney, Fox, Time Warner, Comcast, and DirecTV. The plaintiffs alleged that the companies exploit subscribers by only selling programming in packages — forcing people to pay for services they don’t want in order to receive must-have channels including broadcast networks, USA, and ESPN. But the court rejected the argument, upholding a lower court decision, saying the key issue is whether pay TV companies thwart antitrust laws. Although the consumers argued that bundling reduces their choices, and increases prices, “these allegations show only that plaintiffs have been harmed as a result of the practices at issue, not that those practices are anticompetitive,” the justices said. They noted that other courts have upheld the practice of packaging services even when that raised prices. For example, a court ruled in 1974 that the Dallas Cowboys didn’t abuse its local monopoly over its own tickets by requiring people who wanted to buy season ticket packages to also pay for undesirable preseason tickets. Since the team had a lawful monopoly “the tying arrangement could not adversely affect competition” it said because “there was no competition to affect.” The Appeals court reached a similar judgement on this pay TV case last year but withdrew its ruling in October after it was flooded with petitions to reconsider.

And this is the reason lifetime appointments are wrong it breeds corruption
The only recourse for consumers then is to STOP paying for any TV bundles or services. Stick to streaming, DVDs or … reading. That’s the ONLY way service providers will get the message. (Boycotting Comcast since 2009.)
And once again,consumers are screwed!!!
As a TV producer I support this decision because it keeps dying but bundled channels artificially alive so they can maybe hire me. But as someone who believes in anti-trust law and agrees with how it was wielded in the past to break apart the studio, television, and agency monopolies to encourage competition, I am appalled. No longer surprised, just appalled.
Is the Judging saying that we acknowledge that the consumer is harmed but since no harm is done to the Corporations and since Corporations are in agreement about the bundling pratice (They are not fighting amongst themselves)… then its ok?
That is not what was said at all. The court said that consumers MAY have paid higher prices because of this practice, but that was not sufficient to prove an antitrust violation, because higher prices can result from practices that benefit competition. I won’t go into any examples of how practices that benefit competition can also raise prices, but suffice it to say that this is very well documented in the economic literature, if you’re interested.
The thing that is important to remember about this case is that it was dismissed for failure to state a claim. What that means is that the plaintiffs could not come up with even a threadbare theory of how this practice injured competition. The plaintiffs tried to argue that competition was injured because they had fewer choices and were paying higher prices, but that happens all the time as a result of choices companies make that are nonetheless not antitrust violations.
A good analogue is the computer market. Say that all I want to do with my computer is simple word processing. That’s it, I don’t want to do anything else. So all I need is a very simple computer. A .2 mhz process, one gigabyte of hard drive, and 8 mb of ram will do me solid. But, for some reason, Apple refuses to sell me a computer with only these minimum tech specs. The end result is that I can’t buy a computer for Apple unless I pay a MUCH higher price for a bunch of tech that I don’t want at all. Has Apple done anything anticompetitive? No. Nothing they have done is anticompetitive. Now suppose it turns out that NOBODY will sell me a computer with only my minimum tech specs (which is more akin to the situation here, where no one will sell you an a la carte cable package). Does that change anything? No. The fact is, companies are free to determine how they want to sell their own products so long as they are not colluding or taking actions intended to hurt or exclude other competitors.
So the court said: Listen, what you’ve suggested is the injury to competition here–i.e., higher prices and fewer choices–is not enough, give us something more. And the plaintiffs couldn’t do it. Game over.
Corruption ay its best.
1% wins again.
Let me guess…the judges were Republicans.
this is why consumers steal content
because big business are a-holes
The decision makes perfect sense. The court was not asked to determine whether bundling is bad for consumers; that was simply not the issue at hand. Deciding based on that factor would be akin to a criminal court deciding a murder trial based on whether the defendant had committed theft.
Furthermore, it’s also likely that bundling does *not* hurt consumers (remember, the court didn’t rule on that one way or the other). If a pool builder forces you to buy a jacuzzi with your pool, that increases the total cost because it takes more labor, more construction materials, etc., to build the jacuzzi. But it’s totally different with digital products like cable channels. The added cost of providing one more consumer with one more channel is effectively zero. What’s happening for the typical consumer is that you’re paying for the channels you like, and the cable company is essentially throwing in the others for free. If you could pick channels a la carte, you would probably pay just as much or more in total, but you wouldn’t have the benefit of those extra channels on the rare occasions when you want to watch them.
You’re right Glen, the problem is that the whole package price is too expensive in the first place. Most folks have to pay $60. to $100 for cable and then you pay for internet separately. Why? Isn’t Comcast, effectively just an antenna? I believe in paying for the content, but the lines themselves should be much cheaper. Cut your bill in half boycott television, streaming only.
Agreed, the monopoly power of the cable companies gives them the ability to charge higher prices than they otherwise would. My point was simply that *bundling* is not the problem.
“What’s happening for the typical consumer is that you’re paying for the channels you like, and the cable company is essentially throwing in the others for free.”
Not true. My cable company [Time Warner] has specifically said it has to raise all package rates because of the increased cost of providing expensive sports programming.
I don’t watch sports programming.
And there is NO bundle option without it.
Interesting. I Googled around to find your source, and here’s what I found:
“Jim Gordon, a spokesman for Time Warner, laid blame for the latest rate increase on higher fees charged by broadcasting companies for access to popular channels such as ESPN and Fox Sports.”
http://articles.latimes.com/2011/dec/27/business/la-fi-lazarus-20111227
That’s close to what you said, but not exactly. He does give sports channels as examples, but he refers to “popular channels” generally as the cause of the increase.
Moreover, my point was that the added cost of providing a channel to *one more consumer* is approximately zero. This is still true, even if the broadcasting company has increased the fee that it charges Time Warner. As long as TW has paid for ESPN, it can provide that channel to additional customers for essentially nothing.
Obviously, Mr. Gordon has an incentive to give a cost-based public justification for raising prices to consumers. So he points to popular channels and says they’re paying more for them, which might even be true. And he points to sports specifically because those are among the most popular channels. But you’re not going to get a full understanding of TW’s pricing strategy from a spokesman. There’s nothing here to indicate that *bundling* is responsible for the high (and rising) prices, because there is no increased cost to TW from providing that channel to more customers.
@glen With that story came some information about how much each channel costs. IIRC ESPN costs something like $3 per subscriber whereas the next most expensive channel is about $1.75 and the vast majority of channels cost less than $0.50 if they cost anything. I’d like to just cut a couple channels from my package.
I have the available package which includes Comedy Central, the only channel I want to watch on cable, and it still costs $75 per month and it keeps going up all the time, last year it was $69. I’d like to cut a couple dozen channels from the 300+ so I can pay a more reasonable price. This is a feature the vast majority of cable subscribers would love to have and yet there isn’t a single company that offers it. Not a single company. I wish someone could explain to me how that’s not evidence of illegal price fixing.
I’d like to see for myself whether selecting channels al a carte is more or less than my current bill. Then I can simply opt for whichever method costs me less. What’s the harm in giving consumers choice (except to some fat cats’ profits).
The fact that I wouldn’t choose pricey ESPN or any sports channel makes me wonder whether your blanket statement is true for someone like me, with very focused tastes.
“If you could pick channels a la carte, you would probably pay just as much or more in total, but you wouldn’t have the benefit of those extra channels on the rare occasions when you want to watch them.”
LOL…yeah that’s exactly why the cable companies refuse to offer a la carte – they’re trying to save the customer money.
These bold faced lies by industry shills are remarkable and pathetic.
Seriously folks just cancel the service and then they’ll get the hint.
Unanimous decision heard by Barry G. Silverman (Clinton, ’98), Consuelo M. Callahan (GWB, ’03) and Sandra S. Ikuta (GWB, ’06). Judge Ikuta wrote for the court.
The appeal was a direct result of the District Judge dismissing the initial lawsuit with prejudice for failure to state a claim.
Fairly straight-forward ruling. It’s unlikely this ruling leads to further litigation, but if the petitioners wish to continue they can appeal to the en banc court or SCOTUS.
http://www.ca9.uscourts.gov/datastore/opinions/2012/03/30/09-56785.pdf
this is why i cut the cord. i got a mohu antenna for over the air network stuff. i got a wdtv live to stream netflix, hulu plus, and stuff i get from torrents. and i have an xbox live for, well, i dunno. but i gots it.
of course im still paying $60 a month to comcast for internet, but i use it practically all the time, so its worth it to me.
Just cancel cable, put up an antenna for OTA and get the cable shows you *want* to watch via other means (DVD, iTunes, whatever…)
They’ll never make cable fair for customers…customers just need to abandon them.
It is an urban legend that a la carte channel options will reduce how much consumers pay for TV services. When you buy in volume the unit prices are lower. So if you buy less channels one would expect each of those channels to cost more money each.
NY Times did a great piece on these economics a few years ago and concluded it wouldn’t get consumers what they were seeking — i.e. to spend less.
Premium cable brands (HBO, Showtime, Starz) can be bought a la carte today and they cost from $9 – $17 per month. Netflix and Hulu Plus are like premium channels and they costs $8 each per month. Let’s assume sports channels cost about the same as the premiums ($8 – $17). MLB.tv costs $20 per month over the Internet. And then let’s assume all the other channels, like CNN and BET, cost half those rates when purchased individually ($4 – $8 per month).
Let’s assume the average household watches about 15 channels very regularly.
Then at the low end it would cost no less than $60 per month w/o any sports or other premiums. Add 1 sports and 1 premium channel to the mix of 15 channels and the bill goes up to approx $104.
Approx $100 a month gets you a package of more than 250 channels from most providers. Approx $60 gets over 150 channels.
Doesn’t seem to me consumers would get what they are after by breaking up packaged content.
I cut the cord because of this. Don’t miss cable at all.