The next evolution in ongoing wars? It’s a new version of the old cable TV model: bundles of streaming services between companies.
Customers like bundles, especially if they are getting a discount on the price. Media companies like bundles because they help reduce churn (i.e., churn rates) and reduce customer acquisition costs, even if it means working with potential rivals.
Disney and Warner Bros. Discovery is teaming up for a Disney+-Hulu-Max combo to debut this summer, and Disney, WBD and Fox Corp. hope to launch the Venu Sports package of live channels in the fall. (Pricing for these bundles is TBD.) And on May 29, Comcast began selling StreamSaver — a bundle of Peacock, Netflix, and Apple TV+ at a discount of 35% or more — just to its TV and bandwidth customers. wide.
The partnership between Disney and WBD “presents a solid new roadmap for the future of the industry,” said JB Perrette, CEO and president of international streaming and gaming at WBD, when announcing the deal in May.
But does this happen? Exactly how powerful these streaming packages will be remains to be seen. Either way, this won’t mark a revival of the extremely valuable pay TV fat packs of the past. The way the streaming landscape has advanced means that the dynamics are completely different from cable TV. Today you can’t get, say, the full complement of live sports on ESPN without having a bunch of other networks that you don’t really care about, while you don’t need to buy a bloated streaming package simply to get, say, Netflix. .
“It all started with Netflix going direct to consumer,” says Frank Boulben, chief revenue officer at Verizon Client Group. “When you do that, you can’t do these mandatory packages.”
For more than two years, Verizon has been steadily developing its lineup of streaming add-ons. Perks available to the telco’s wireless customers include discounts on a Netflix-Max bundle (both with ads) for $10 per month (a 40% savings) and a bundle that includes ad-free Disney+, ad-supported Hulu and ESPN+ for $10 per month (which is 33% less than a package Disney presents that features Disney+ with ads). Says Boulben: “It’s a big difference from the standard cable TV package, where you get 200 channels and only watch 15.”
The new bundles and gifts are part of “the streaming market recovery,” as Morgan Stanley analyst Ben Swinburne said in a research note last week. The tradeoff for content owners and distributors: lower churn, but also lower revenue per subscriber.
For WBD chief David Zaslav, who has been pushing the idea of intercompany streaming bundles for the past year, synthetic bundles (meaning the services aren’t integrated into a single app) like Disney+-Hulu-Max The offering will reduce the pressure on companies to spend on Netflix-level content in order to attract a large-scale user base. In other words, WBD doesn’t have to try to make Max all things to all people (even as it tried to increase the streamer’s appeal by combining content from the Discovery networks, CNN, and live sports from TNT and TBS).
“As we look at what happens in the future, there will likely be a restructuring in how people view content,” Zaslav told analysts on WBD’s May 9 earnings call. “And there is a lot of irrationality out there that is being undermined by the amount of money spent.”
Another problem driving companies like WBD and Disney toward streaming partnerships: All the major platforms are expanding ad support levels and are hungry for attention. “Advertising works when you can be successful – and that depends on the number of subscribers you have. This is an important part of the profitability equation,” says John Harrison, EY head of media and leisure in the Americas. Legacy media companies, in particular, want to retain advertising dollars that are moving away from linear TV, he adds.
Some observers don’t think the new package will move the needle. “It’s difficult to see in the future how packages will attract a large enough number of people to make a difference to the bottom line,” says Colin Dixon, founder of independent analytics agency nScreenMedia.
The only player to watch here is Netflix. “Netflix is the biggest draw of any package,” says Dixon. “If they see a decline in Internet revenue and subscribers don’t pay the full rate (as part of a package), they will exit quickly.”
Meanwhile, Constitution Communications wants to use streaming to support its standard cable TV package. The carrier has included Disney+ and ESPN+ in its premium TV tiers at no additional cost — and Constitution just made a similar deal with Paramount World to bundle Paramount+ and BET+ with Spectrum TV. It is unclear whether total income per subscriber under the Paramount-Constitution pact is high, low, or stable. But “we imagine that lies (pay TV providers) are increasingly leveraged in these relationships,” Swinburne noted. “The Constitution has made public that it is unwilling to have its customers ‘pay twice’ for similar content,” he wrote, asserting that Paramount+ includes “an important content overlap” with Paramount’s linear networks, including CBS.
The old-school pay TV package will likely take a big hit next year, as Disney aims to launch a standalone ESPN streamer by fall 2025. And the new streaming packages will “only make cord-cutting worse.” ,” says Ross Benes, senior TV and streaming analyst at eMarketer. The fact that Comcast is launching a bundle with Netflix, Peacock and Apple TV+ “is an indication that they don’t care if you ditch linear TV,” he says. “They just want to sell you a better web package.”