Everyone is excited these days about the death of ESPN, particularly as evidence of the death of “bundle priced” Cable TV. Consumers are supposed to be excited that soon they will only have to pay for the content they want. Don’t get too excited yet.
Let’s remember the basic purpose of bundled cable TV: for content producers, cable company bundles provide an easy, single outlet for their content. It’s “somebody else” who will get the content to their viewers, sell advertising, and collect payment. For consumers, bundles provide a packaged set of channels that’s easier to manage (and price) than a bunch of individual contracts.
Apart from whatever level of collusion exists in the TV world, the prices for bundles have reached some sort of equilibrium: basic cable TV with Internet costs about US$45, and “channel bundles” are $30-40 on top of that. Seems like a great savings for cord cutters, AND they only have to get the content they want, right?
Maybe not. A cord cutter still pays $35/mo for basic Internet. They pay $9/mo for an annual Netflix subscription, but not everything is available on Netflix. The TV and Movie industry use their copyright stranglehold to limit a lot of high demand content to Hulu, for $8/mo. And since the cord-cutter demographic is also the prime demo for Game of Thrones, there’s HBO Now for $15/mo. Turns out that if you want to get access to the same content you got in your cable bundle, you’re looking at $67/mo, or $71/mo if you include Amazon Prime. And what happens when ESPN opens their live streaming channel?
What happened to our cord-cutter savings? Suddenly it looks like you’re paying the same amount of money, just to different people – plus, you’re stuck with the administrative pain of keeping track of what shows are available on which service, and making sure you’re subscribed. Of course, the number of services is still growing, so this part of the cost is only going up.
I have a great business idea: I’ll handle all the subscriptions for you, and you just pay me one monthly fee. $90 per month, and you can have Internet access with Netflix, Hulu, HBO, and Amazon all together. You get the simplicity of knowing you’re subscribed to all the most popular services, without having to track every one or handle the payments. I call it “bundling”. See what I did there?
There is a market niche for bundled services in any multi-channel environment. It sure seems like cable is dead, and bundle pricing with it. But the truth is it’s just in transition. We’ll still pay basically the same amount, for the same things we did before; we just get a new delivery mechanism.