February 1st, 2013

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Cable guys don't understand YouTube or Google

YouTube to start offering some pay channels.

The article misunderstands how Google operates. Google doesn't need this to work like a cable service any more than it needs Google Docs to eliminate Word. The idea is to leverage your existing infrastructure and keep customers inside your own service.

Meanwhile, cable guys are taking advantage of their existing market power -- which makes even an imperfect alternative attractive.


Similar failure to understand economics (and regulation) here: http://go.bloomberg.com/tech-blog/2013-01-31-your-cable-bills-going-up-again-but-forget-a-la-carte-pricing/

The assumption is that you can always raise prices indefinitely, and that the mechanism of pricing somehow doesn't matter.

Actually, it matters quite a bit, because consumers won't pay $12 for ESPN -- at least not in the numbers anticipated. Some will, especially if they can save money dropping MTV or other channels they don't want. But it is also unlikely ESPN would raise the price that high. The current market structure lets ESPN hide the price from consumers and spread the cost among consumers who don't want the product.