For years, big media companies have publicly endorsed the “cable bundle.” Why wouldn’t they? pay-TV operators have paid them handsomely to distribute content through the cable ecosystem. But recently, the language tied to those endorsements has changed.
On 21st Century Fox’s quarterly earnings call this week, Chief Operating Officer Chase Carey told analysts that cable packages “have to be concocted with the consumer in mind.” Although Carey said most TV watchers still want a bundle of programming, he pointed to the “better consumer experience” offered by standalone Internet services such as Netflix and Hulu (which is partly owned by Fox). Comparatively, Carey cited cable’s “TV Everywhere” strategy as an “example of the challenges when you don’t create the right consumer experience.”
The big question for cable and satellite companies is what does the ideal video offering look like? Some distributors are pushing so-called skinny bundles — cheaper plans with fewer channels. But on Disney’s quarterly earnings call, CEO Bob Iger highlighted consumers’ need to be mindful of any hidden costs associated with unbundling. “One of the questions that has yet to be answered is how large does the savings have to be for the consumer to essentially abandon the expanded basic (cable) package and the choice that it gives … for some less expensive package with far less choice,” said Iger. “And are there other cost ramifications?”
Online TV services will certainly make the case that their offerings are superior — whether it’s Sony’s PlayStation Vue or the much anticipated Apple television service, which is reportedly coming soon. And for media companies, these services create an opportunity to make money on top of what they’re already generating from the cable world. As CBS CEO Leslie Moonves noted on his company’s quarterly earnings call Thursday, “Whether it’s Apple or Sony or someone else, the amount of money we’re getting per subscriber is higher.”
At the Internet & Television Expo in Chicago on Tuesday, Chernin Group’s Peter Chernin said the growing number of TV alternatives “will ultimately force the bundle to justify itself, which is not the worst thing in the world.” Chernin, a former Fox executive, has been an active investor in the over-the-top area.
“Multichannel television has sensitively served America well for nearly 40 years. This is not, nor should it ever be, the time to blow it up,” Leo Hindery, Jr., told TheWrap. Hindery was president and CEO of TCI, Liberty Media and later AT&T Broadband. He is now an investor in independent programmers. “Rather than a proliferation of ‘skinny bundles,’ viewers and consumers would be much better served if the relative handful of extremely expensive channels, especially including the sports-driven channels, were to be offered to them a la carte.”
Whatever happens, big media companies are clearly hedging their bets to make sure they’re ready for an unbundled world. Fox’s Chase Carey talked this week about the “sweet spot” of owning and distributing your own content, while Bob Iger highlighted Disney’s ability to take its product directly to consumers, adding “we’ve got some development underway to do just that.”