AMC Networks Inc (AMCX): You’re Stuck With the Cable Bundle, and That’s Not so Bad

Although these critically acclaimed shows don’t attract the largest audiences, they attract devoted audiences. If you’ve had a conversation with a fan of Breaking Bad, the show sounds more addictive than the crystal meth Heisenberg cooks.

The cable network business is much different from the broadcast network business. Broadcast networks make most of their money from advertising while cable networks make much more from affiliate fees. Therefore, broadcast networks produce shows intended to attract wide audiences, resulting in some of the most boring television.

Cable networks are looking for a spot in the bundle so 100 million subscribers pay their carriage fee whether they watch the channel or not. Thus, they produce great television shows that attract devoted audiences. The rest of the schedule is filled up with cheap programming and syndicated shows.

Without the bundle, every channel will resort to appealing to the lowest common denominator. They’ll want to attract as wide an audience as possible because they can’t rely on every cable subscriber to pay their fee. This means more bad TV and less quality programming.

Moreover, Laura Martin, an analyst at Needham & Co., suggests that fewer than 20 channels would survive in an a la carte cable model. In all likelihood, your family watches at least one channel that wouldn’t make the cut.

Martin estimates that half of most cable channels’ revenues is derived from advertising, and advertisers are relatively uninterested in stations with less than 25% penetration. No more than 20 channels have the pricing power to maintain a significant audience while raising prices.

In short, unless you only watch Two and a Half Men, the cable bundle is critical to your television watching experience. Quality shows will become even rarer, and you might not even have a chance to subscribe to a favorite channel.

The cable bundle is the worst … except for all the other options

If you love television, and it’s hard not to with all the great shows these days, then the truth is the bundle is your best friend. Cable still offers one of the best values in entertainment on a per-hour basis. A family of four can go to two movies a month for the same price as the average cable bill.

While you may not need the breadth of entertainment cable allows, the only way it survives is through the bundle. Otherwise, the enterprise unravels: TV shows cease to take chances, channels go out of business, and you’re still paying the same price. The bundle keeps anyone from paying too much and supports quality entertainment. Is that so bad?

The article You’re Stuck With the Cable Bundle, and That’s Not so Bad originally appeared on Fool.com and is written by Adam Levy.

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