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Family Ties

Sprint recently announced a new promotion that bundles a free subscription to Sling TV Orange for customers that sign up for four or more unlimited smartphone plans. AT&T has dropped similar hints about potentially bundling mobile data with DirecTV Now.

Do these promotions represent the future of bundling or a blind alley? Three quick points…

1. Mobile Plans Are (Theoretically) A Way To Acquire New Customers
Remember the order of operations? You know, those fun rules from elementary school math class that determine what part of the math problem comes first. Among today’s adolescents the world over, a similar logic applies—simply put, the smartphone comes before anything else. Three out of four teens 13-17 have a smartphone with a data plan, many of which will have had a smartphone for 10 years or more before they own a TV set of their own, much less a wireline Internet or pay-TV service. In fact, smartphones take precedence over every other traditional signifier of growing up, including employment (i.e., less than a third of teens even have a summer job), transportation (interest in car ownership and even having a driver’s license is declining), and living arrangements (more young people 18-34 live at home than at any time in the past 130 years).

Given this position, it seems reasonable for broadband pay-TV (BPTV) services like Sling TV to try and get in on the action. The consensus is that once young consumers are hooked on a smartphone service they are likely to stick around and, over time, become legitimate candidates for a broadband pay-TV service. While the basic logic of this argument is fairly sound, it falls apart when we examine how family-friendly mobile plans actually work in the US. This brings us to our next point.

2. Parents (Not Children) Pay For Smartphone Family Plans
The ‘Big 4’ US cellphone providers (AT&T, Verizon, T-Mobile, and Sprint) are all aggressively pushing multi-line family plans. The best overall value is invariably the 4-line offer at the ‘sweet spot’ of $160-$180 per month. Why four lines? Easy. These plans clearly envision Mom, Dad, and two kids. The ‘kids’ may be middle-schoolers just getting their first phone, or twenty-somethings attending college in another state. The operator doesn’t really care, so long as the grownups are paying for it. This makes perfect sense for operators in the short run –- kids demand phones and have no money to pay for them — but muddies the transition to adulthood even further. Maybe we should create a rite-of-passage celebration for people when they (finally) move off their parents’ cellphone plan. What does this have to do with BPTV? Read on.

3. Skinny Bundles Do Not Make Sense As A Family Pay-TV Service
As discussed at the top, Sprint’s new promotion provides a free subscription to Sling Orange with four or more lines of unlimited data. Sling Orange, however, is limited to a single stream (as well as a very limited assortment of channels). It is hard to envision how Sling Orange would satisfy an entire family in today’s world of personalized anytime, anywhere screens.

Importantly, parents with at least two children living in the home that can afford $150+/month for cell phones are highly likely to be one of the 99 million US households that still uses a legacy pay-TV service. Remember, for the parents of today’s teens, the traditional (fixed-line) Internet+Legacy Pay-TV bundle preceded their use of mobile data services. Children living at home clearly have access to the family pay-TV service, and so have no need for their own subscription. Even those living away from home can already utilize the family TV Everywhere credentials for free; especially useful if those credentials provide access to Game of Thrones on HBO Go.

The use case for this Sling Orange promotion is thus vanishingly small. The service may appeal to adult children who are still on their parents’ cell phone plan, live away from home, don’t have any other way to access pay-TV, and actually want to watch live TV (cloud DVR is not included in this promotion). Even in those rare cases, however, would the parents really switch the whole family to Sprint just so Johnny can watch ESPN on his phone? I just don’t see it.

Service providers are struggling to find ways to hook young people on pay-TV. Bundling BPTV with mobile data may sound like a good idea, but in practice faces significant challenges. Parents have accepted the need for kids to have smartphones. Subsidizing pay-TV for their offspring is a whole ‘nother level!

Stick with TDG and stay ahead of the curve.

Joel Espelien is a Senior Advisor for TDG and serves as an advisor and Board Member to technology start ups. He lives near Seattle, WA.