While TV bundles have gotten a bad name, especially with the “TV Is Dead” crowd, they are actually the most efficient way to distribute programming, for both programmers and consumers. Which is why we are seeing it happen all over again.
The TV industry is modernizing and adapting to the digital age, but that process is more a rearranging of deck chairs than an actual changing of the guard. Thus, the bundles need to be rearranged too, and hopefully improved upon.
The new-style bundles will take on several distinct, though likely overlapping forms. The first is the network bundle, which combines all the properties of a single network. Thus, we have the ViacomCBS bundle that Apple is pushing, where viewers can buy CBS All Access and Showtime for just $9.99, a massive savings over the $20.98/month the two would cost if purchased jointly. (For that matter, adding CBS All Access will allow Showtime subscribers, who currently pay $10.99/month to get bother services for just $9.99.)
There’s also the bundle that Verizon has put together with Disney properties, where wireless customers who have one of Verizon’s higher-priced unlimited bundles receive a bundle of Disney Plus, Hulu and ESPN Plus for free. (Those who choose a slightly less high-priced plan only get Disney Plus.)
These two plans are more of an initial foray than a long term plan. For one, ViacomCBS and Disney are the only two networks that have multiple subscription apps in their portfolio (and ViacomCBS seems to be planning to consolidate theirs).
Also, these bundles are largely promotional in nature, designed more to get users to remember that Apple’s TV service still exists and to get users to upgrade to higher priced Verizon mobile plans. (This is not a guess: when I looked into how I could get the Disney package from Verizon, I learned that I would need to upgrade my wireless plan to a package costing $15/month more with features I did not need like Verizon storage. Given that I already get Disney Plus with my existing plan and already subscribe to Hulu Live TV, I decided to pass.)
The second type of bundle is likely to become the norm, and that is the year-long subscription. CBS All Access has offered it for a while and Hulu recently rolled out their version. This type of bundle is a win all around: consumers like it because it saves them money and if they are fans of the service, they are going to subscribe to the service for the full year anyway.
Programmers like it because it allows them to provide potential advertisers and investors with subscriber numbers for the full year. This latter point is particularly important right now, as the glut of new services means there is likely to be a high level of churn, as viewers take everything for a test drive and move from service to service.
The Second Phase of Bundling
The next phase of The Great Re-bundling will involve multiple services. We’ve already seen the start of this with Amazon and Roku’s Channel Stores, which allow viewers to subscribe to multiple services and access them from a single interface, should they be so inclined. (Or not, given the high level of resistance from HBO and Peacock.)
While these services allow users to pay a single bill, they do not offer any sort of discount and that’s likely coming next. The Apple plan with ViacomCBS is a foreshadowing of how this might work—Apple is technically doing the same thing as Amazon and Roku with it’s Apple TV app, and if more than a few dozen people owned Apple TVs, it might actually be a thing.
But in the months ahead, we are likely to see both the streaming device manufacturers and the MVPDs and vMVPDs attempt to package several “Flixes” (multibillion dollar streaming services) together for a fixed yearly price. Roku and Amazon may throw a new device (or a deeply discounted device) into the deal, and the MVPDs will throw in a discounted broadband connection. Initially these deals will be limited to the companies that initially agree to participate in them—likely those that need the extra subscribers these plans will bring—but eventually they will include most all of the Flixes, and viewers will have options as to which ones they want to include in their bundle.
The problem with these bundles is the same problem that Warner and NBCU are pushing back against: allowing these services to add your Flix to their bundle means giving up an awful lot of power.
First and foremost you are giving up access to the viewership data around your programming and your advertising, including first party data on your subscribers. Roku and Amazon also want to take a share of advertising and subscriber revenue. (For which their counterargument is that you would not have nearly as much advertising and subscription revenue were it not for them, but still...)
A Third Way
There is a final option for bundling, one that may prove more attractive to programmers. That is to have an unaffiliated third party do the bundling, an app that allows users to compile the bundles they want and allows ad revenue and viewer data to flow back to the programmer.
This may prove to be the best solution of all, as it prevents programmers from becoming beholden to distributors, and ensures that the apps, whose primary audience will be consumers, will be well designed and user friendly.
As this next year will see all of the Flixes go live, and more and more viewers cutting the traditional pay TV cord as a result, the Great Re-bundling is very much on the near horizon. How it plays out will have a major impact on the future of the television industry, for advertisers, programmers and, especially, for consumers.
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Alan Wolk is the co-founder and lead analyst for media consultancy TV[R]EV