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As the great de-bundling of cable grows courtesy of “skinny” digital offerings, where consumers get a few dozen channels — think Sling TV from Dish Network — instead of several hundred, Roku on Jan. 2 took a baby step toward bundling streamers.
The maker of smart-TV devices led by CEO Anthony Wood said its customers could now choose from 25 offerings — including Showtime, Starz and Epix alongside lesser-known streaming entities like Noggin, Dropout and Tastemade — and pay for them all on a single bill. Financial terms weren’t disclosed, but observers estimate that Roku is taking up to an ongoing 20 percent commission on each subscriber it enlists.
Bundled streaming would mark a turning point in the landscape: In 2015, there were 205.4 million traditional pay television subscribers in the U.S., but by 2022, the number will have fallen to just 169.7 million, eMarketer estimates. And by the end of 2019, audience demand for Netflix original programming will overtake that of its licensed titles, a Dec. 13 report from Parrot Analytics and S&P Global Market Intelligence found.
When that happens, one could argue that Netflix arguably will have achieved its unstated goal of becoming a “replacement” for cable and satellite television. Cue the debate as to whether this is a good development for consumers (and the entertainment industry) or akin to George Orwell’s Animal Farm, in which the pigs who brought down one undesirable situation replaced it with an equally objectionable one — only with themselves atop the hierarchy. Cable and satellite TV, after all, hit an 11-year low in terms of satisfying its customers in 2018, according to the American Consumer Satisfactory Index.
While the Big Three — Netflix, Hulu and Amazon — were absent from the list of streamers available on a single bill at Roku, observers increasingly believe it is inevitable that the era of bundled streamers is near as households tire of paying an average $107 a month for cable, Leichtman Research Group estimates.
“Bundling is likely on the horizon as consumers may eventually have streaming-platform fatigue and will not want to subscribe to dozens of SVOD services separately,” says Kayla Hegedus, an industry data scientist with Parrot Analytics. “Consumers can already get premium cable platforms as add-ons through Hulu and Amazon, so bundling has already started.”
Not to mention that Comcast is signing up Netflix customers to help retain its own subs. But the days could be numbered for that convenience, as NBCUniversal boss Steve Burke hinted in a holiday greeting to employees in December that the Comcast-owned company could launch a Netflix-like product of its own in 2019. “While you all go off to relax, swim or ski,” wrote Burke, “Maybe, just maybe, next year we will announce our plan for OTT.”
Likewise, Hulu is delving into bundling by offering HBO+ and Cinemax for an extra $20 a month, or by adding Spotify Premium, a music streamer, to Hulu’s Limited Commercials plan for $12.99 a month. Amazon Channels is taking a stab at bundling the likes of HBO, Showtime, Starz, Cinemax and others with its Prime Video service (“no cable required,” it boasts in marketing materials), and Apple may be secretly working on something similar. Smaller cable operators, like Cable One, for example, promote OTT services as well.
“You’ll see a lot of that,” says Craig Moffett of MoffettNathanson. Adds Ben Weiss, chief investment officer of 8th and Jackson Capital Management, “Charter and Verizon will increasingly seek to bundle and sell a package of internet-delivered content, which could include brands like CBS All Access, Amazon Prime Video and Netflix.”
Others believe that Comcast and AT&T, whose WarnerMedia is launching its own streaming service (as is Disney) in 2019, could be in the catbird seat should bundles of streamers go mainstream. These conglomerates have a relationship with millions who already subscribe to their various services (internet, wireless, cable and more). Simply add a bundle of streamers into an existing monthly bill. “I also think that stand-alone companies like Starz could be part of a greater bundle offered by Amazon,” says Amy Yong of Macquarie Bank. U-Verse — a triple play of internet, TV and wireless offered by AT&T — makes so much sense as a streaming bundler that Michael Pachter of Wedbush Securities says, “I’m surprised they haven’t done so yet.”
Already about 43 percent of U.S. households subscribe to more than one streamer, notes Bruce Leichtman of Leichtman Research Group, but the vast majority also subscribe to traditional pay TV, and he doesn’t envision a future where bundles of streamers supplant the cable/satellite offerings. “Four out of five households still want live television,” he says. “Amazon is helping people cobble together a streaming experience, but I don’t think Netflix will join, or that Netflix and Hulu would ever team up, and live TV will never be thrown out the window.”
Roku being in the mix doesn’t surprise Steven Birenberg of Northlake Capital Management. “It is the future and an often overlooked positive for leading cable companies that invest in their platform,” like Comcast’s X1 product, he says.
But Roku bristles at the comparison to cable TV. “The experience of our new offering is in effect bundled, but we are not Comcast. We’re not using the term ‘bundled,’ it’s just a way to easily manage your account,” says Roku spokesman Eric Savitz. “People are sick of paying for 500 channels of content they don’t care about.”
While the jury is out on how serious streamers will get about bundling, the effort is already upon us, and it could become a confusing mess for consumers who are looking for simplicity before cutting the cord, some warn. “There will be so many different ways to sign up, every possible flavor will be attempted,” predicts Jimmy Schaeffler of Carmel Group. “Many of the monetization and mixing-of-bundles methods will fail.”
A version of this story appears in the Jan. 9 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
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