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Resetting the Bundle

Mari Silbey
9/4/2015

I have a theory about the TV bundle.

From the outside, it may look like the pay-TV bundle is headed into a death spiral. Viewers are binge-watching shows online and avoiding the commercials that feed revenues. Programmers are starting to go direct to consumers with content, bypassing pay-TV providers. And some of the best new shows on TV aren't on broadcast or cable, but on Netflix, Amazon and Hulu.

All of these trends show that the pay-TV business has to evolve. But they don't prove that the TV bundle is on its way out.

More content choices and new distribution outlets are fracturing TV audiences, and that's happening at the same time that traditional pay-TV bundles have become bloated with seldom-watched channels and networks that are increasingly expensive for service providers to license. The resulting perception is that the monthly cable bill is too high and the bundle is too filled with content consumers don't want.

The bundle itself isn't at fault, however. Bundles still make sense from a financing perspective because they help subsidize development of new content. Done right, bundles are also good for consumers. They help expose viewers to new shows, and they can help keep costs down by making revenue more predictable for programmers.

The reality is, the bundle needs a reset. Cut down the cost and the content catalog, and the perception of value changes. This is already happening with skinny bundles. Netflix, Sling TV and HBO Now are all content bundles, but offered at a much cheaper rate and with limited but valuable programming. Because there are no long-term contracts, consumers can even combine skinny bundles and still end up with a lower monthly fee than the one that comes with a traditional cable package. (See Dish's Losses Are Sling TV's Gains.)


Want to know more about the impact of web services on the pay-TV sector? Check out our dedicated OTT services content channel here on Light Reading.


In my own case, I might consider pairing the upcoming Comcast Stream offering -- which will include broadcast networks, HBO and a cloud DVR feature -- with Sling TV for live ESPN and my existing Netflix subscription. All told, those three bundles combined would only cost me roughly $45 per month, and I would get all the content I currently care about.

Set-up doesn't require new equipment, and in theory, I'd be able to cancel any of the services at any time.

Here's the thing, though. Because these bundles are so useful, I can see service providers adding to them over time. More original programming. More syndication of old TV series. More coverage of sports events. That's a good thing. But it will also cause the price to creep back up again. Eventually, the skinny bundle will become a fat bundle again, and the cycle will start all over.

The bottom line is that bundles aren't bad, and they're not going away. But they are subject to competition and disruption. And when they get too big, someone needs to hit the reset button.

— Mari Silbey, Senior Editor, Cable/Video, Light Reading

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kq4ym
kq4ym
9/17/2015 | 3:26:13 PM
Re: New Bundles Needed
The skinny bundle works for me, even though I'm not a sports fan and lots of those channels are very popular with lots of fans. But, maybe what's needed is a real pick your own channel. Do away with even small bundles and even subscriptions? Let me choose exactly what channels I want and be free to delete and add at will.
Phil_Britt
Phil_Britt
9/7/2015 | 6:17:55 PM
New Bundles Needed
You're right about the combination of skinny bundles wth other options. Sports would always be the differentiator for me. ESPN would be important, but so would local baseball, not always available on broadcast TV and some Big Ten games. The latter is an issue for those of us who went to college out of state. Need to be able to choose (yes, there would be a cost) certain teams. 

One way that might work would be some type of mid-size bundle that would strip down some of the offerings, and the cost. There comes a level, as you point out, that the bundle just becomes too expensive.
davidhoffman5
davidhoffman5
9/6/2015 | 1:05:07 PM
Re: Indeed
The television or video part. See YouTube as the future. You can ''subscribe'' to the channels you are really interested in. You can change which channels you ''subscribe'' to at any time. The cable system operator becomes the ''dumb'' pipe.  Now we will need top performance from that '''dumb'' system, so it would help to make sure there is real wired competition for ''dumb'' pipe service by having at least a trio of service providers to choose from.

A significant factor also will be retail DVRs to replace the proprietary set top box DVR services offered by the cable companies.  
danielcawrey
danielcawrey
9/5/2015 | 4:28:47 PM
Re: Indeed
Sling TV looks really slick, I'm going to sign up for a 7 day free trial I think.

I really like to have sports on while reading, but I don't want to pay for an expensive cable package. I don't use Netflix as much as I should, so maybe Sling is the answer for me. 
DHagar
DHagar
9/4/2015 | 7:55:04 PM
Re: Indeed
mendyk, I agree with yours and Mari's resolution that the best solution is "Resetting" the bundle.  The economies of scale make the fresh bundle the best option.  The problem seems to develop with becoming out-of-sync with the customer's choice/interests and/or the ongoing development of the provider.

Maybe they need a Core Bundle - that spreads the cost for economies of scale, allows limited programming adjustments for the customer to stay interested, and with or without participation in upgrades - mass customization?

Either way, bundles work - just as full dinner prices are better value than ala carte.
DaveZNF
DaveZNF
9/4/2015 | 3:47:06 PM
Content is (still) King
Premium content isn't going anywhere even if the means of distribution changes. I've gone back and forth on bundles over the years, and mostly feel like the bundle is here to stay and is not necessarily a bad thing. But I agree what is bundled and at what cost is ripe for reinterpretation. Unfortunately, it will take some time as the cable and satellite providers are locked into multiyear deals in which a party (say Disney) requires they include an entire lineup of channels, often on a primary tier. So there's quite a few moving pieces. On paper, Verizon new buckets are an interesting approach - but in my case, I'd actually end up paying more for less (no BBCA?!). For someone like my mom, who has a limited lineup of channels she's interested in and won't touch a DVR, the best "bundle" for her would be Sling TV on Roku. If only they'd make the the UI more senior-friendly...
msilbey
msilbey
9/4/2015 | 12:50:29 PM
Re: Indeed
I agree on the binary mindset. I've been hearing cable is dead for a while now, and I don't even know what that's supposed to mean. Which part? 
mendyk
mendyk
9/4/2015 | 10:29:48 AM
Indeed
Excellent points -- there clearly needs to be a reset not only on the video bundle but also on the pack mindset that casts markets in a binary light (OTT is the future, therefore conventional video service is doomed). There are still a lot of people with money who would rather have a mainly passive relationship with their video entertainment. Skinnier packages are probably the closest we're going to get to pure a la carte bundles. But we can't have everything we want -- or don't want.
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