skinny bundles

Scripps top TV exec Brian Lawlor says retrans-paying cable and satellite subs are down 2%-3%, but that new carriage-fee revenue from OTT skinny bundles should eventually offset the losses. In any event, retrans will grow 15% next year, while net retrans grows in low double digits.

Jessica Reif Cohen, longtime media analyst at Bank of America Merrill Lynch, said virtual MVPs (aka “skinny bundles”) from the likes of Dish, DirecTV, Hulu, YouTube and Sony “so far are one big yawn, a big nothing” in terms of penetration and subscribers.

Since internet-TV packages have begun to heat up in earnest, a question has hung in the air: Are they cannibals? Will these packages hurt their traditional counterparts, sometimes offered by the same company, by cannibalizing their customers. In short: Will people who have a $100-a-month DirecTV package right now trade it down for something smaller and digital? In a new report from UBS analysts led by John Hodulik, the answer seems to be “yes.”

Over-the-top “skinny bundles” are continuing to grow, and their subscribers are streaming plenty of content, but for now, they’re still a relatively small piece of the puzzle compared to traditional cable or satellite subscriptions as well as all over-the-top viewing (including people who subscribe to OTT services like Netflix while still having traditional cable).

The slow-motion crumbling of pay TV has suddenly started to look like a looming avalanche. The unprecedented surge in cord-cutting during the first three months of 2017 has heightened Wall Street fears that the industry’s enormously profitable big bundle of channels is coming apart at the seams — for real this time.

Basketball players must pivot for tasks like squaring to the basket, blocking out for a rebound or getting away from defensive pressure. In a similar way, TV stations and other media need to keep one foot rooted in the core business while making calculated and strategic changes in position. The bottom line is that daily content planning must encompass both linear and digital platforms. Digital cannot be an afterthought if it’s to succeed.

A new analysis of television networks from research firm MoffettNathanson looks at which networks are the most valuable from the perspective of multichannel video programming distributors, and how to determine which of those should be included in “skinny” channel bundles. The top sports and news channels appeared most favorably positioned in the analysis, with pure-play cable nets like Discovery and Scripps most at risk.

Verizon would ditch the big TV bundles tomorrow if the networks allowed it, said CEO Lowell McAdam at the Internet Association’s Virtuous Circle conference in Menlo Park, Calif., Monday. “We would sell skinny bundles exclusively,” said McAdam.

Charter Communications CEO Tom Rutledge is unimpressed with all of the hoopla surrounding planned virtual pay TV services — including ones planned from Hulu and AT&T’s DirecTV Now that promise to offer superior value vs. cable.

As programming costs continue to bulge, big players have been forced to rethink the core building block of pay TV: the bundle. The “fat” package of channels, oft criticized for its bloated price, is giving way to streamlined options, including two alternatives last week, from Time Warner and Dish, that showed how the trend is gaining momentum.

The satellite TV company is offering a “skinny” version of its traditional TV package for about half the price of its current plans. The service is the new “Flex Pack skinny bundle,” a plan advertised at $39.99 that comes with 50 channels and the option for one of eight themed channel packs. But subscribers can bring the new service down to $29 by forgoing any add-ons.

It’s in the network affiliates’ interest to nurture some of these new skinny bundles by supplying them with their signals, even if it is on terms dictated by their networks. It’s a hedge against cord cutting and it’s another avenue into the OTT and mobile world where younger audiences await. Here’s the caveat: the affiliates’ revenue from the OTT providers — their end of whatever the networks negotiate — must be comparable to the net retrans they are getting from cable and satellite.

Consumers who are trying to save money on their cable bills are increasingly moving to “skinny bundles” that have fewer channels. As consumers go on a cable bill diet, they are effectively dropping channels. But while skinny bundles are cheaper for consumers, they will be the death of some cable channels.

Hulu is planning a new web subscription service that would sell live and on-demand programming from the likes of ESPN, ABC, Fox and FX, for about $40 a month, starting early next year.

The idea that some broadcasters floated about a decade ago to use their then-new subchannels to provide low-cost packages of cable programming never came to fruition. But with the advanced technical capabilities that ATSC 3.0 will provide, it’s an idea worth rethinking. The interest in skinny bundles, which rely on broadband instead of broadcast for distribution, suggest that dissatisfaction with the bloated, expensive bundles of cable and satellite has risen to a point where consumers are ready to act. The demand is there.

A Digitalsmiths survey shows nearly 75% of TV consumers want “skinny” TV packages with 20 channels or less, versus the 100 to 200 channels typically offered. They’d also like to pay less — roughly $40 rather than the average $80-$120 pay TV bill.

Verizon Communications is overhauling the lower-priced FiOS Custom TV bundles, and will now offer two basic packages — one with sports channels, and one without them. The new “skinny” TV packages, launching Sunday, come almost a year after ESPN and other programmers objected to the initial Custom TV packaging, under which all sports nets were available only in optional add-on tiers. ESPN had filed a breach-of-contract lawsuit against Verizon over the issue.

TiVo’s analytics unit Digitalsmiths released its 3Q Video Trend Report Wednesday, which surveyed more than 3,000 consumers 18+ across the U.S. and Canada. The research found 76.7% of respondents would like the ability to pay for only the channels they watch. The survey presented respondents interested in an à la carte service with a list of over 75 popular channels that are typically included in pay TV packages and asked them to pick their desired channel lineup.

Wall Street analysts say cable and satellite operators will be hurt more by OTT offerings than will stations because the skinny bundles are going to need stations’ local programming as well as their network lineups.

While some in Hollywood are heralding a golden age of quality TV, driven by investments in new shows and movies by the likes of Netflix and Amazon, some content provider execs say the growing interest in a la carte options and skinny bundles could stifle the development of new and experimental TV programs and content.

RBC Capital Markets securities analyst David Bank says the growth of smaller, less expensive packages of TV networks could alter the current cable business model. But, he says, both the trend and its impact on traditional programmers are “somewhat overstated.” Programmers, he says, particularly broadcasters, will handily adapt and survive.