In what may be the biggest surprise of 2015, cable companies are breaking up the bundle and committing to skinnier TV packages.
Comcast Corp. (Nasdaq: CMCSA, CMCSK) today launched Stream TV in Chicago, its second market after Boston where the service made its debut last week. Stream TV pares down Comcast's traditional video service, offering only the major broadcast networks plus HBO, but making them available over any Internet-connected device. Stream also includes a cloud DVR feature and is significantly cheaper than regular cable TV, coming in at a price of just $15 per month. The service is expected to hit Seattle next and spread to the rest of Comcast's footprint in 2016. (See Comcast 'Stream' Joins OTT Flood.)
But Comcast isn't the only cable company testing out skinny TV. After at least one Charter Communications Inc. subscriber last month reported getting promotional materials for a new Spectrum TV Stream service, Charter made its skinny bundle efforts a little clearer in St. Louis, Mo. this week. According to the St. Louis Post-Dispatch, Charter sent the news outlet an email explaining that it's trialing a new streaming video offering in St. Louis and other markets with customers that subscribe only to Internet or Internet and phone service.
From earlier reports, Spectrum TV Stream costs $13 per month for the major broadcast channels plus HBO and Showtime, or $20 per month (up to $27.50 with taxes and fees) for 16 additional networks, including Discovery, ESPN and FX. (See Charter Skinnies Down With New TV Bundle.)
Aside from reaching out to the Post-Dispatch, Charter has been remarkably close-lipped about its skinny bundle strategy and roadmap. A company spokesperson was unwilling to comment on the record, but did point to a statement given by CEO Tom Rutledge on Charter's latest earnings call: "We test, occasionally, new products and we test price points, and some of the stories you've read about what we're doing are as a result of tests," said Rutledge.
There are fears in the industry that skinny bundles will have a negative impact on pay-TV revenues, a concern that appears to be borne out by Verizon Communications Inc. (NYSE: VZ), which blamed lower earnings last month partly on "an increase in customers right-sizing their existing bundles." (See Skinny Bundles Sock FiOS Video Revenues.)
However, operators do have an opportunity to build incremental revenue on top of skinny bundles by offering add-ons, including supplementary channels, video-on-demand content and DVR features where they're not already included in the base package. Skinny TV is also a promising gateway product for customers who don't want to pay a high monthly fee upfront, but are open to being seduced into a larger commitment later with compelling content and services.
While the financial impact of skinny bundles is still uncertain, the risk of not competing with lower-cost online video services like Netflix and HBO Now is too big to ignore. That analysis is what makes skinny TV a gamble that cable companies are now willing to make.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading