The bundle is dead; long live the bundle.
OK, we exaggerate. The traditional TV bundle still has a pulse: even with cable and satellite services shedding subscribers, millions of Americans continue to pay for a traditional pay TV package, with hundreds of available channels to choose from. And if we’re ultimately moving toward a new form of bundling, we aren’t there yet: there are still plenty of direct-to-consumer TV subscriptions available to viewers who prefer to sign up for services on an à la carte basis.
But the planned merger of Warner Media and Discovery at least raises the possibility that when it comes to the business of TV, the bundle vs. à la carte pendulum may be shifting back in the bundle direction, with individual streaming services joining forces to potentially offer consumers an aggregated viewing experience.
In other words, the cable bundle is dead; long live the streaming bundle.
The trend toward TV content unbundling (which one could argue began in 2015, with the launch of both the standalone HBO Now service and the “skinny bundle” Sling TV) was an attempt serve the needs of TV consumers frustrated with bloated cable TV packages, loaded with hundreds of channels they never watch. Direct-to-consumer and slimmed-down streaming services helped ensure that even in the event of large-scale cord cutting, TV networks would still have a presence in consumers’ homes.
But as more streaming services were introduced, a new problem emerged—consumers grew frustrated with the formerly simple process of finding something to watch across all of the different services they use. We’ve seen that frustration reflected in our research; in one of the most consistent findings we’ve reported over the past few years, a majority of TV viewers wish for a central interface offering a one-stop view of all the sources they subscribe to, including both traditional pay TV and streaming services.
Good news for HBO Max and Discovery+?
So, does this longing for a return to “one-stop” content discovery mean that consumers would welcome a mega-streaming service from HBO Max and Discovery+, a service where they could access Warner Media and Discovery content all in one place?
To help answer this question, we dug into the findings from our recently released “The Best Bundle” research to see just how much crossover viewing exists between services and networks owned by the two companies. As a starting point, we looked at how much crossover exists between subscriptions to streaming services HBO Max and Discovery+.
According to our research, a total of 29% of TV consumers subscribe to at least one of these two services. But a large majority of that group subscribe to HBO Max only (18% of all consumers), 5% subscribe to Discovery+ only, and just 6% subscribe to both. So at first blush, this would suggest that a service that simply merges the two existing offerings (for example, with a single interface, but with the same content as what each offers today and for the same price as what one would pay for both individually) would have relatively limited appeal.
We also looked at the extent to which subscribers to each streaming service watch the traditional TV networks that are currently owned by the other company—specifically, how often Discovery+ subscribers watch content from Warner Media networks, and vice-versa.
It turns out that people who subscribe to Discovery+ are more regular viewers of HBO (and to a lesser extent, Adult Swim, Cartoon Network, and Cinemax) than the average TV consumer. But they’re no more likely than average to watch content from other networks that would conceivably remain in the Warner Media stable, such as CNN, TNT, TBS, and TCM.
There’s even less cross-over with Discovery among HBO Max subscribers. In fact, those who subscribe to that streaming service are no more likely than the average viewer to watch any of the Discovery-owned networks we ask about in the survey.
To consolidate or not to consolidate
An article published in The Hollywood Reporter on May 26th included this quote from Discovery CFO Gunnar Wiedenfels:
“If you look at the models that have been successful in the market, I guess the book ends are sort of one fully integrated product versus sort of a bundled approach,” he said, adding: “We’ll work hard over the next few months here to determine the final go-to-market approach.”
Given the relative lack of viewing crossover between Warner Media and Discovery platforms and networks, we wouldn’t expect that consumers would see strong enough value in a combined “DiscoveryMax+” app that incorporates content from each company—at least not without a significant break in the price of subscribing to each separately.
Of course, the new company could decide to aggressively price such a combined service in the hopes of attracting as many current subscribers to either as possible (not to mention brand new subscribers lured by the appeal of an all-in-one service with a broad and deep library of content). In the streaming service arms race, that could help the new service reach or potentially surpass the subscriber numbers boasted by Disney+.
On the other hand, the company could potentially achieve the same reach by keeping the two services separate, with a discounted bundle price, à la Disney+/Hulu/ESPN+.
Either way, the ultimate lesson here is that while the experiment of disaggregating TV networks may have gone too far, leading consumers to wish for the good old days of consolidation, it’s also possible for the pendulum to swing too far back in the other direction. If recent history has taught us anything, it’s that aggregation simply for the sake of aggregation leads to subscriber defections. Consumers don’t want to have all TV content in one place; they want to have all of their TV content in one place.