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At this point in the streaming wars, bundling, rather than M&A, is back in the spotlight.
During a May 18 investor conference, Warner Bros. Discovery CEO David Zaslav was asked whether he would be interested in exploring a sports- and news-led “skinnier bundle” with content from the streamers. Zaslav, who had earlier been bemoaning the irrationality of the streaming business, from the money being spent to the amount of content on different platforms for viewers to sort through, appeared to take a macro approach to the question. “There should be a consolidation, and I think it’s more likely to have to happen in the packaging and marketing of products together,” he continued. And he cautioned, “If we don’t do it to ourselves, I think it’ll be done to us,” naming Amazon, Apple and Roku as potential bundlers.
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On one hand, analysts say the realization of this prediction is likely not imminent, considering that many of the streamers still have a large number of subscribers and libraries full of intellectual property.
Plus, as evidenced by the existing Disney bundle with Hulu and ESPN, while customers may enjoy having fewer services to subscribe to, the average revenue per user for the streaming platform is lower in a bundle, because of the lower price for the package. “It’s a classic volume-for-price trade-off,” says Macquarie analyst Tim Nollen. But with the economics of traditional cable bundles growing worse, coupled with advertising woes and the ever-present potential for a recession, the tide could turn for some streamers. “I mean, you can’t keep bleeding forever,” notes Bank of America analyst Jessica Reif Ehrlich, “and some of them are.”
The renewed desire to bundle is something of a race against the clock. Zaslav and some other media moguls (perhaps most notably Fox CEO Lachlan Murdoch) have long touted their plans to use the cash generated from their cable TV channels to help fund streaming efforts. But it has become increasingly clear that cord-cutting continues to accelerate, and there are inflection points on the horizon that would only speed up cable’s demise. For years, live sports and live news have held the traditional pay TV bundle together, even as most entertainment content migrated to streaming services. That is reflected in linear TV ratings, where sports and news remain dominant genres. But ESPN is beginning to explore what would be needed to bring its “Flagship” programming to streaming, a move that would be a knife in the heart of the bundle. ESPN has been the dominant force in cable TV for decades, but if it left, everyone else would need to follow.
While no one expects a direct-to-consumer ESPN in the near term (“We’re talking years, not months,” one connected source says) the “inevitability” of it (to quote Disney CEO Bob Iger on his company’s May 10 earnings call) is enough to spook the rest of the industry into contemplating what comes next. “It’s a huge decision for us to make,” Iger added. “And we know that we’ve got to get it right, both in terms of pricing and timing.”
Similarly, Warner Bros. Discovery is exploring how to take its sports rights, which include the NBA, MLB and NHL, to streaming via its Max platform. In fact, Max, which launched May 23, has live sports in the form of U.S. men’s and women’s national team soccer matches, which air on TNT and stream on Max. Luis Silberwasser, the chairman and CEO for Warner Bros. Discovery Sports, notes that the company has seen “really interesting engagement” on Max for live soccer. “In the majority of our deals, we have the flexibility to expand beyond linear, and we are now in the middle of conversations and strategies to try to figure out exactly what the right streaming strategy is for the sports that we have,” Silberwasser says.
But the potential for major sports to migrate from the bundle to streaming is not the only X factor that could hasten corporate strategizing. One high-level media executive predicts to The Hollywood Reporter that by the end of this year, a major cable company (not Charter or Comcast, but a provider with single-digit millions of subscribers) will abandon the TV business altogether, outsourcing it to a streaming service like YouTube TV.
That has already happened with small regional players like Frontier Communications, but the industry is bracing for the move. Dennis Mathew, the CEO of Altice (with about 2.5 million pay-TV customers), was asked about outsourcing his company’s video product on the company’s last earnings call on May 3. “We are looking at all of these options,” Mathew said, adding that the company is interested in “rightsizing that product” and “figuring out [how video] fits into the portfolio going forward.”
It’s a change that — even if a streaming alternative is offered — would likely turbocharge cord-cutting and speed up the erosion of the larger pay TV ecosystem. It’s what MoffettNathanson analyst Craig Moffett calls “the impoverishment cycle.”
“The impoverishment cycle looks for all the world like it will be irreversible. It has already gathered so much momentum that it is now uneconomical for anyone to fight the tide,” Moffett wrote in a May 12 report on cord-cutting. “Even ESPN, one-time stalwart of the traditional ecosystem, has conceded that there will be a day when a la carte streaming is a viable option. That very acknowledgement makes the impoverishment cycle an irreversible one. We are watching the sun beginning to set.”
Comcast, for its part, is upping its ante to find a bundle option that appeals to consumers, unveiling on May 23 a $20-a-month offering titled NOW TV that carries live channels from A&E, AMC, Hallmark and Warner Bros. Discovery along with a Peacock Premium subscription and 60-plus free, ad-supported streaming TV channels like Sky News and NBC News.
Peacock alone has cut some intriguing content deals. The service is the exclusive home for the WWE’s biggest events, like Wrestlemania, and also struck a deal with Hallmark Channel to bring its linear channels to its platform (as well as a rotating library of content). It’s a model that might be replicable.
Bundling has already begun within Hollywood companies, with Disney adding Hulu into its app (in a move that many also saw as a signal that Disney will ultimately buy out Comcast’s stake), and with Paramount pulling in Showtime to its streaming platform. Other possibilities for bundling could include smaller services such as AMC+, which recently saw a drop in subscribers, or Paramount+, which has seen growing streaming losses, being pulled into a larger streaming service; or Lionsgate, which owns Starz and has also struck streaming deals with Roku and others. Some of these smaller studios don’t have enough appeal as an acquisition target, but could make sense as part of a bundle, Nollen says.
And as Zaslav noted, some tech giants are beginning to position themselves as possible bundlers of the future, with Amazon’s Prime Video Channels and YouTube’s Primetime Channels looking to carve out pieces of the puzzle by offering an array of subscription services in one place. Both already offer Paramount+, AMC+ and Starz, among other services (though YouTube has in recent months tried to undercut Amazon on price, taking a smaller cut of the proceeds than the retail giant). However, Nollen notes that the price tag for bundling bigger streaming services may be too high and undesirable for these tech-first companies.
Virtual pay TV services like YouTube TV and Hulu With Live TV aggregate content from all the major players, making them a possible bundler as well. That being said, “the rapid price escalation has quickly reduced their competitive advantage,” S&P Global analyst Naveen Sarma notes. “These services are likely to be less financially stable than legacy pay TV services.”
Reif Ehrlich adds that while Zaslav seemed to eschew any merger or acquisition activity for now, WBD is in the process of improving its balance sheet, and Wall Street appears to be waiting on the sidelines until then. Once the stock price rises, his position could change. “They’re not in a position to make acquisitions, but they are in a position to bundle,” the Bank of America analyst notes.
WBD had also been talked about as a potential target for acquisition, to which Reif Ehrlich says: “They’ve done the heavy lifting, so of course, they’re attractive.” But as Zaslav noted, it’s unclear what the streaming landscape will look like in the next 12 to 24 months and whether the climate will be right for an acquisition.
All of this leads to what the consumer really wants. “What the consumer would ultimately like would be to subscribe to a single service where they can just pick and choose the content without having to know or care what network it’s on,” Nollen says.
And given the messy, confusing landscape, that consumer desire is likely to remain a pipe dream for the foreseeable future.

This story appears in the May 24 issue of The Hollywood Reporter magazine. Click here to subscribe.
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