Do premium channels decrease program variety?

TV-signal distributors sell bundles that may include both popular premium TV channels and narrow niche TV channels. We analyze how a premium channel affects the variety of niche channels in such bundles. When the premium TV channel’s preferred strategy is technologically feasible, the number of niche channels in the bundles is not affected by the presence of the premium channel. A crowding out effect in terms of fewer niche channels occurs however if the premium channel, instead of charging the distributors per-viewer served fees, sells transmission rights for a lump sum. This negative effect is nonetheless partially alleviated if the distributors can commit to transmitting non-premium channels before the premium channel invests in program quality.