From Fat to Skinny Bundles

Before the advent of streaming, the music industry was a package-based business focused on selling compact discs (CDs). Hit songs were bundled with a collection of mediocre songs, filling an 80-minute CD and allowing labels to maintain high prices.

If this sounds familiar, it’s because cable TV works in much the same way (and has outlived the CD). Operators sell bundles of networks so that expensive flagship sports programs are packed with channels full of less interesting (and cheaper) TV programming. This forces consumers to pay the same higher price, even if they don’t want 80% of the channels or programs. Meanwhile, cable operators are bound by minimum penetration requirements, which means networks are forcing cable operators to sell this aggregation model to the majority of subscribers.

This model has worked like a charm for years, allowing media conglomerates like Disney to charge transportation fees surplus of 2 billion dollars annually From one broadcaster only. However, the TV industry faces a double whammy that will destabilize this model forever, and perhaps force advertisers to change their strategies as well.

The first strike is obvious. Live TV has put this lucrative transmission model on the brink of collapse. Low-to-midrange TV viewers are comfortable canceling their $100 cable packages and subscribing to what they can get from paid streaming services like Netflix and free services like Tubi, among others.

Media companies are reeling as a result. For every million households that cancel their pay-TV subscription, Disney loses about $120 million in transit revenue annually, according to Some estimates. On this scale, 6.9 million subscribers cut the cord Last year it wiped out $828 million from Disney’s bottom line. Cable companies will Lose another 3.5 million subscribers In 2024. We’re talking billions of dollars, and the bleeding won’t stop.

The second punch is the sales model. Broadcast technology allows networks to go directly to the consumer without having to rent a cable box or climb onto a roof to install an antenna. This reached an extreme when WBD, Fox and Disney announced Venu. Venu is (and was?) the best example yet of networks that want their cake (carriage fees) and eat it too (by bypassing cable operators). Fubu cried wrongly, and The courts quickly sided with them.

Where do we go from here?

Distributors want skinny bundles where they only pay transportation fees for what subscribers want. Networks seem to care less about viewers. They want revenue, or more accurately, they want to stop the decline in transportation revenue that occurs as a result of households cutting cable.

Gauging consumer interest in this high-stakes game is not easy, and it is almost impossible for any actor in the play to make a decision. As shown in the chart below, if the entire industry abandoned the old model and allowed narrow bundles, would that lead to renewed interest from viewers who want smaller, cheaper cable bundles (green line)? Or might poor packages simply accelerate the decline of the transportation model and push revenues to the bottom (red line)?

The viewer will decide, and advertisers will have to follow

No matter how much controversy there is See from Disney and other networksIt’s not the networks that will decide the future of television. It’s the consumer. Right now, we don’t know whether consumers want the fat package (with its options and ease of consumption), or the skinny package (with fewer options but lower cost).

However, opting for the skinny package will fragment the TV landscape even further. The rise of ad-supported streaming and FAST channels has already forced advertisers to adopt new strategies to reach viewers who never use a wire.

Tight packages would force brands and agencies to work harder to package comprehensive reach (and replicate what they had during the older cable era). This would be difficult and expensive, and ad frequency would be even more difficult to manage. If there’s anything to mitigate this, it’s that we’re starting to see a “rebundling” of the DTC streaming business with cable bundles (albeit with Doubtful success).

Watch the future

Television remains unique in that it delivers an engaging audio and visual message to the consumer, but reach is arguably just as important for advertisers. While more choice may be beneficial for consumers – and even lead to greater loyalty and lifetime value – advertisers need to carefully track this development and adjust their strategies accordingly. Those looking for real reach will need to get comfortable paying premiums for this type of programming, like live sports, if they want to succeed in the future.

[Editor’s note: This is a contributed article from Tatari. Streaming Media accepts vendor bylines based solely on their value to our readers.]

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