The Truth About Unbundling (Why It Won’t Send Your Cable Bill Plummeting)
“Why am I paying for all these channels I never watch?” This has become the rallying cry for those who’d like to see their MVPDs offer stripped down “skinny bundles.” Or, even better, a la carte options, where viewers can piece together their own bouquets of channels, selecting only the networks they watch, at a price point that’s far more in line with what they consume.
But is that a realistic scenario or is unbundling just going to lead to higher prices and fewer choices as the networks claim?
It seems the networks may be in the right here. Most of the people doing the complaining don’t seem to get how bundling really works. The network groups set a price for their most popular properties and then throw in the rest for free, or close to it.
Say, for example, NBC decided that the fair price for NBC alone was $15 per subscriber per month, they might charge Cox $17 for NBC plus SyFy, Bravo, USA, Oxygen, E!, et al. For NBC, it’s a balancing act: while they might be able to get more money selling a newly resurgent USA on its own, what they really want is to get the network more widespread carriage. This in turn boosts ratings, which boosts ad rates and thus, ad revenue.
The bottom line being, of course, that stripping the bundle of everything but NBC to create a “skinny bundle” might wind up saving the consumer a whopping $2/month. Similarly, an a la carte package that includes NBC, USA and Bravo might wind up being more than $15/month because NBC will need to offset falling ad revenue with higher carriage fees.
Does that mean bundles are here forever?
Not necessarily. The rapid decrease in live viewing and the concurrent decrease in ad revenue from live viewing may be the culprit. If the cost of maintaining The Esquire Channel as a 24/7 broadcast network seems too high, NBC may opt instead to produce 30 hours of On Demand Esquire content per week. This (on a larger scale, of course) may just be what it takes to undo the bundle.
It has long been our contention that many of the networks currently on air don’t need to be 24/7 broadcast networks, and would, in fact, be better served producing 20 to 40 hours’ worth of high quality On Demand programming each week. They’d likely get higher audience numbers for the On Demand shows, which would then allow them to charge higher ad rates. It would also free many of the networks from having to pay for the syndicated programming that currently fills out the schedule in the wee hours.
Who would benefit from this sort of unbundling?
The average consumer would not see any significant decrease in their monthly bill, as the fee for the primary networks would remain the same (or close to it.) They would, however, see more options and more opportunity for quantum viewing (the ability to watch on any device at any time.)
Viewers who are not heavy TV viewers would benefit, as they would be able to select the half-dozen networks they do watch and create a much less expensive package. Networks could continue to make money from these viewers by moving to a transactional model for their On Demand content, making each show or series outside of the viewer’s subscription package available for a fee. This sort of arrangement would benefit both parties: the viewer would be able to watch the shows they want and the network would gain both transaction fees and ad revenue from the additional viewers.
While there are numerous forces working to change the television industry, none is more powerful than the trend towards time-shifted viewing. Live viewing is becoming less and less common, and that behavior affects everything from ad revenue to carriage fees to the size and shape of the once ubiquitous bundle.
Stick with TDG and stay ahead of the curve.
Alan Wolk is one of the industry’s most influential thought leaders and futurists. He writes frequently on advertising models, OTT and social TV.