Here's the basic problem with your proposed model: Channels popularity follows power law[1]. If you gave choice to subscribers to pay-by-channel most of the channels will die horrible death in sort period of time. However this is not good for the cable company because lack of content means they will lose portion of subscribers who are in long tail as well as revenue that is generated by long tail. One may argue it's also not good for consumers as the available selection shrinks dramatically. So in essence cable companies are packaging low performers with high performers so that long tail survives. This is one of the situation where "let the market figure out" strategy doesn't work very well either for producers or consumers.
Comments
Here's the basic problem with your proposed model: Channels popularity follows power law[1]. If you gave choice to subscribers to pay-by-channel most of the channels will die horrible death in sort period of time. However this is not good for the cable company because lack of content means they will lose portion of subscribers who are in long tail as well as revenue that is generated by long tail. One may argue it's also not good for consumers as the available selection shrinks dramatically. So in essence cable companies are packaging low performers with high performers so that long tail survives. This is one of the situation where "let the market figure out" strategy doesn't work very well either for producers or consumers.
[1] https://en.wikipedia.org/wiki/Zipf%27s_law