Reconsidering The Bundle

Pity the poor bundle. For years now, it’s become the symbol of everything that’s wrong with pay TV, the poster child for the overstuffed packages MVPDs forced on customers for monthly fees well in excess of $100.

In the new world, we were promised, viewers would be able to choose their channel options a la carte, and prices would go down, viewers would be in control and the internet would make things right again because, well, the internet always does.

Only this time, maybe it didn’t.

As many potential cord cutters have discovered, a la carte doesn’t necessarily mean cheaper. All of those individual services have to charge more because they now have fixed costs they didn’t have before, costs like marketing and accounts payable.

They also have to account for much higher levels of churn, as viewers realize that all they have to do to get rid of HBO between Westworld and the new season of Game of Thrones is to go to the website and click “unsubscribe,” an action far more easily accomplished than calling up Comcast or Charter and spending an hour on a phone chain, only to learn that getting rid of HBO would negate your PlatinumPlus Triple Play Package and thus actually cost you $5 more each month.

The Benefits Of Bundles

While it initially sounded like a whole lot of propaganda, there is much truth to the fact that bundles keep costs down. Networks that don’t have to market themselves or chase down deadbeats every month can charge less money, especially if they know that they have a much larger base of customers. That can prove critical to smaller services that are not part of larger network groups and allow them to reach a potentially broader audience. It’s also better for smaller networks that are part of larger network groups as the popular larger channels can subsidize their costs. And, of course, it’s valuable for viewers who are interested in niche programming as they don’t need to maintain a separate subscription.

For the entities actually providing the bundles, the big benefit of bundling is, of course, stickiness: there is no underestimating consumer’s love for a single bill and for having all their entertainment needs met by a single provider. While subscribing to an ever rotating cast of freestanding apps sounds wonderful in a tech journal article, in reality, it can be a major hassle and many consumers would prefer just to have everything grouped together in a single service with a single bill.

What We Need To Lose

Back in the 80s, cable networks realized that advertising was indeed a zero sum game: in a completely linear world, you could only watch one ad at a time. So the more networks they had, the greater their chances of capturing a viewer (and the ad revenue that came with that viewer.)

In a time shifted world, that’s no longer the case. So there’s no need for ten variations of every major channel. 

Cut them down to one, and the bundles start to come down to a reasonable size.

The VOD-Only Option

The other change that will bring bundles down to size is to take many of the smaller networks and turn them into VOD-only networks. This is something I’ve been pushing for years: the costs of buying all the syndicated programming that’s necessary to keep smaller networks on the air 24/7 (along with the built-in costs of maintaining that 24/7 presence) are no longer worth it in a time-shifted world.  Producing 10 to 20 hours of originals a week would free these networks up, and a more library-based  interface (something like the one currently used by Hulu Live TV) would allow viewers to find those VOD-only programs with ease.

That would have a two-fold benefit: it would allow the MVPDs, vMVPDs and whoever else is offering the bundle (Amazon?) to offer a much more manageable linear offering. It would also allow them to offer viewers a VOD library that seemed every bit as flush as Netflix’s.

Other Media Too

The final piece of the new bundle would seem to be other subscription-based digital media: Spotify, Pandora, Audible and the like, as well as streaming services like Netflix and Amazon Prime. Including them in a bundle increases its attractiveness  (Spotify for less!) while also increasing stickiness, as now all the viewer's subscriptions are available from a single source with a single bill and (if it’s done correctly) they're even discounted.

No More "Nordstrom Prices For Kmart Service"

If bundling is to succeed, the industry will need to solve the original sin that lead to the push for unbundling in the first place: massively unpleasant interfaces and massively confusing screw-the-customer rules, regulations and pricing models. The combination of the two created a sense among consumers that they were paying Nordstrom prices for Kmart service: over $100/month for a set top box-based interface that looked like it had been designed in the 1990s. By Stasi.

The good news is that the industry seems to be on the road to solving this.

Many of the vMVPDs have intuitive, modern interfaces. (Hulu Live TV's is pretty close to revolutionary.)  Add in more transparent policies and pricing (especially on vMVPDs) and the industry may be on the way to actually offering Nordstrom service for what will still likely be Nordstrom prices.

At which point, paying for a bundle of channels may not seem like the worst idea in the world.

It might, in fact, seem sort of clever.