The cable bundle is getting chipped away piece by piece. Cord cutters and cord shavers are having a huge impact on the industry and everyone involved in television is finding a way to keep them engaged as customers as much as possible. With the proliferation of Netflix, Hulu, and other streaming services that’s getting more and more difficult.
One of the ways in which operators are trying to combat people leaving the bundle entirely is by creating so-called “skinny bundles” which are smaller lineups that still have premium channels. These are becoming popular options because folks sitting at home are realizing that it’s silly to pay money for television channels they never watch. If it seems like it’s one step further towards a la carte cable packages, it is. The debate is still ongoing as to whether or not that would actually be cheaper or more expensive than the bundle, but the skinny packages seem like a nice compromise for television watchers to get what they want.
Another option that seems to be on the horizon could have a big impact on sports networks and the industry as a whole. At a conference in Boston, the head of Viacom spoke about a potential “entertainment pack” that could cut out sports channels entirely from future skinny bundles.
Viacom CEO Bob Bakish spoke of the initiative Monday during his keynote breakfast at the J.P. Morgan Global Technology, Media and Telecom conference in Boston. Bakish referenced the slew of OTT skinny bundle offerings that are hitting the market at around $40. He told J.P. Morgan media analyst Alexia Quadrani that what he called the “entertainment pack” option would probably be priced around $10-$20.
The new breed of digital MVPDs are still not “transformational” opportunities for pay TV because they remain dominated by broadcast signals and sports. He doubted whether new offerings from YouTube, DirecTV Now and Hulu would have much appeal to what he called “cord-never millennials.”
“The transformational opportunity is to bring in a new entry segment at a much lower price point,” Bakish said. The industry needs “a path to bring in someone who wants high-quality entertainment” but doesn’t want to pay for sports channels. With a truly low-cost entertainment option, MVPDs can also offer more flexibility to consumers to “trade up from and trade down as the household needs change.”
This is not great news for ESPN or anyone else. For ESPN especially, they’ve been dealing with a significant amount of subscriber losses that have negatively impacted their business. ESPN lost 7 million subscribers in just two years due to cord cutting and cord shaving. Over six years they’re down 12 million subscribers. With the network charging over $7.00 per subscriber per month we’re talking huge, huge dollar amounts. How many more customers will they lose when this “entertainment-only” package becomes available and customers find out they can get most of the channels they want without having to hold up the business model of sports networks? The fact alone that the industry is trying to reach someone “who wants high-quality entertainment but doesn’t want to pay for sports channels” should set off alarm bells.
We all know the major cost in the television landscape is live sports. It pays out the biggest rights fees, demands the biggest carriage fees, and costs the biggest amount of your cable bill. That pressure coming from all sides is one of the reasons why ESPN and other sports networks have been under so much stress recently. And why they need to do everything they can to re-invent themselves and find new ways to keep paying customers around.