What if Cable Networks Sold Digital Bundles?
As much as $4 billion will come out of U.S. TV network ad revenue in 2014 and flow into digital, according to estimates
This story first appeared in the Nov. 28 issue of The Hollywood Reporter magazine.
Suddenly, over-the-top digital services are all the rage. Sony's PlayStation Vue, which launches this month with content from Viacom, CBS, Fox, NBCUniversal and Discovery, arrives weeks after CBS' All Access, where, for $5.99 a month, users get shows a day after they air on TV and older series commercial-free. HBO, Showtime, Sony, Dish Network and Verizon also are readying OTT services to compete with Netflix, Hulu and Amazon. All of which begs the question: Why don't cable conglomerates offer channels as an OTT bundle directly to consumers, rather than through cable or satellite?
Janney Capital Markets analyst Tony Wible estimates that as much as $4 billion will come out of U.S. TV network ad revenue in 2014 and flow into digital. That means networks "need to find ways that assure they can collect comparable revenue if the traditional ecosystem falters." Wible determined that OTT bundles could replace traditional TV but would not be efficient because consumers could end up paying more. Wible used ratings, affiliate fees, ad revenue and other data to determine how much each conglom would need to charge per month. The results are in the chart above — and the figures don't even include sports.