“This new system has fractionalized all the content that used to be in one spot,” media consultant Patrick Crakes tells TheWrap
Reports of the pay-TV bundle’s death may have been greatly exaggerated.
The decline of pay-TV subscriptions has caused many industry onlookers to predict that the bedrock of the legacy TV model will soon become extinct. But perhaps the bundle isn’t dead, but rather evolving into something new: a way to make it easier for consumers to manage multiple streaming services, while also serving as a much-needed revenue stream for over-the-top platforms.
Amazon and Apple have done it for years: You can tack on a HBO Now or CBS All Access subscription to your Amazon account, or pay through your Apple ID. Roku, which already claims one in three smart TVs sold in the U.S., is becoming an even bigger power player as it increasingly provides consumers a one-stop shop for managing streaming subscriptions. And just last week, The Information reported that YouTube may be getting into that game as well. (Google would not comment.)
With so many streaming services available (and arriving soon), it’s nearly impossible to think consumers will want to pay for all of them individually and manage as many as five to six different bills. As much-maligned as it was, the cable bundle took that responsibility out of consumers’ hands. They payed one lump sum and got all their entertainment from one source. But streaming gave consumers, frustrated at the lack of options and rising costs, an unprecedented amount of choice.
“This new system has fractionalized all the content that used to be in one spot,” Patrick Crakes, a former Fox Sports executive who now works as a media consultant. “That’s probably necessary to create this incremental value in the short run. But overall, on the digital side, you’re going to have to find a way to give the consumers an option to re-bundle it together, somehow, in order to actually scale it.”
Much like the mp3 replaced CDs as the way consumers listened to music, streaming has been seen as the replacement for linear TV. Crakes argues that, until streaming can have that same broad reach, it will remain more as a supplement. Even with the decline in pay-TV homes, that ecosystem still boasts roughly 85 million subscribers. Netflix, the 800-pound gorilla in the streaming space, has just over 60 million customers in the U.S. Over the last year, the company has added less than 3 million new domestic subscribers.
This spring will see three new streaming services hit the market: Peacock, HBO Max and the mobile-only Quibi. Those come six months after Disney and Apple launched their own streaming offerings. Disney used the launch of Disney+ to get into the bundle business, by offering the new service with Hulu and ESPN+ for a discounted rate on all three. The early returns were impressive: ESPN+ more than doubled its subscriber count, from 3.5 million last November to 7.6 million as of Feb. 2.
“Consumers will just find it easier to have one bill,” said Alan Wolk, co-founder and lead analyst at TV[R]EV. “While technically it is better financially to handle all your own subscriptions, most people can’t be bothered and the prices are low enough that they’re likely to forget to cancel even if they’re not watching that month.”
But a reformed bundle in digital has some hiccups.
For starters: The old model was regionally based, meaning that Comcast was the only option in certain areas, whereas Charter had exclusivity in other regions. Satellite providers like DirecTV came in and upended that somewhat by being available nationwide — though cable companies were able to cut deals with apartment buildings where they would ban the use of a satellite dish — but often at a higher price. Streaming, however, is global.
The idea behind HBO or CBS All Access using Amazon or Roku to help sell their subscriptions is rooted in the old bundle model. Amazon Prime has 150 million customers, which HBO can leverage to boost its subscriptions, much like Comcast sells HBO to its own customer base. But it comes with a cost. Amazon gets a cut when it sells an outside subscription, as well as access to the consumer data when they view it on Amazon’s platform.
That consumer data is among the most valuable commodities in the digital space. For a giant like Netflix, that data assist in how to program shows; for a company like Amazon, the information can help in targeting retail products to the right consumers. That competition provides a barrier to having one place where consumers could get all of their streaming subscriptions.
Michael Paull, president of Disney Streaming Services, said last August that the company purposely going to exclude Disney+ from other platforms. You can only buy and stream Disney+ through Disney. “We created this world,” he said, admitting that exclusive access to that consumer data was part of that decision. “We think the best way to watch it is in here.”
Even so, Wolk believes that streaming can replicate the old bundle model, even if means there are more players on the field.
“I do think we will see that — from both MVPDs (who still can offer you broadband and pay TV, they really don’t care what the pay TV package looks like so long as it keeps you buying broadband from them) — and also from streaming devices like Roku, Amazon and Apple,” he said. “Smart TV OEMs like VIZIO and Samsung will likely be part of that play too, and the device manufacturers will play an MPVD-like role in getting subscribers.”