Back when either you or your parents were kids there were only four channels or something. Each network broadcast over the air and supported themselves through advertisements. Cable TV came along to help serve customers in areas where the air waves couldn’t reach homes. But quickly it was learned that through a subscription service content providers could charge customers each month to deliver content to them. An industry was born.

Today cable providers enjoy virtual monopolies over the areas they serve. The only competition comes from satellite providers, and to a lesser degree internet streaming and DVD services like Netflix. It seems like cable has it pretty good but it ain’t so great. Cable is stuck dealing with a price sensitive consumer doesn’t like paying market prices. But on the other end cable must have some very intense fights with the content providers themselves. What do they fight about? Price, naturally.

The television business itself is quite incredible. The end user effectively pays for their content twice. They pay each month for some type of subscription to deliver the content, and then they pay again by having to watch ads served on most shows. The networks themselves get the ad revenue. But then they get a small fee each month for the number of users that subscribe to their station.

Take ESPN for example. We all know they show lots of ads. But the network also gets a fee every month for each user that has ESPN. If that number is 50 cents, then they get 50 cents per user per month. Whether you watch ESPN or not, you’re paying this fee. This has the effect of subsidizing other users. As a major watcher of ESPN, you’re subsidizing my viewing if you don’t watch them. But if you watch a lot of TNT, then I’m subsidizing you. Does that balance out in the long run?

I’d certainly like to see the math. Because the stronger networks also force the cable and satellite providers to buy their lesser channels. Back to the ESPN example; most people want ESPN. But do you also want ESPN2, ESPNU, and ESPNews? In some instances you’d pay for all of those channels.

The TV business is built around a select core group of shows that are strung along to make you watch year-round. There’s a reason many TV seasons start in the fall and don’t end until spring. Because if that’s the only good show the network has they want to give you a reason to subscribe year round. In between their few good shows they’ll cram hundreds of hours of garbage content down our skulls until we can’t help but watch their other shows too.

This can be useful for the viewer as they’ll discover new shows they may like. You can’t help but wonder if this model best suits the end user, or the content providers and creators. Our money goes to subsidize a constant stream of trial and error shows that are terrible until a good one comes along. Likewise our money subsidizes good shows we may not be interested in watching ourselves. A&E supposedly has great TV these days, but I don’t watch them. I’m forced to pay for it if I want my ESPN though.

This business model may be lucrative today. But the future is less certain. The cracks are showing. Folks watch shows online, sometimes illegally. They’re directly choosing the shows they want to watch and will watch it anywhere they can. This may soon connect the producers (which may be independent) directly to the viewers. Though it is unknown if this future will help save the consumer money, it seems like a better idea just to have us pay for the content we want to see.

Read: The ‘Mad Men’ Economic Miracle 

categories: business