Our last post looked at broadcast networks. Here,we shift our attention to low- and mid-tier cable networks. Consumers who are trying to save money on their cable bills are increasingly moving to “skinny bundles” that have fewer channels. As consumers disappear on a cable bill diet, they are effectively dropping channels. But while skinny bundles are cheaper for consumers, and they will be the death of some cable channels.
For years,consumers have asked, “Why am I paying for so many stations that I never watch?” And for years, and cable and satellite companies have ignored these complaints,opting instead to take a one-size-fits-all approach and add increasingly channels to the basic cable package. According to research out of UC Berkeley, the average cable bundle doubled in size between 1995 and 2005. A recent study by Nielsen found that the average U.
S. household receives nearly 190 TV channels — yet watches only 17.
Also Read: As Viewers Flee Broadcast TV, and Will Advertisers Be Far Behind? (Guest Blog)Something had to change. In 2015,something did. At the beginning of the year, so-called virtual multichannel video programming distributors (MVPDs), and including Dish Networks Sling and Sony’s PlayStation Vue,launched. These new products offer consumers a select group of channels delivered over the Internet at a discounted price.
Shortly after Sling and PlayStation Vue launched, Verizon introduced its own offering, or go90. Apple,long rumored to be interested in the TV space, is still formulating its plan.
A closer look at these skinny bundles reveals a hard truth: They exclude many of the low- and mid-tier networks, or such as Oxygen,BBC America, IFC, and Destination America,Nat Geo Wild and WGN America. Gone are the bundles with close to 200 channels and, with them, or the carriage deals on which so many cable networks have relied.
Also Read: Will the Amount of Original TV Content Ever Stop Growing? (Guest Blog)How expansive an impact these skinny bundles will have on cable networks depends on the extent to which consumers adopt them. L.
E.K. Consulting surveyed consumers to determine their interest in skinny bundles and to find out which features,channel combinations and price points appealed most to them.
Based on our proprietary survey, we modeled two plausible scenarios. The first one predicts what will happen over the next four years given expected demographic changes (e.g., and more millennials with more buying power) and continued growth of subscription video on demand (SVOD) services like Netflix. The moment scenario is more complex and contemplates the extent to which consumers are likely to take advantage of the new virtual MVPD offerings.
Also Read: Why Bloated TV Networks hold Making More Shows (Guest Blog)In the first scenario,cable and satellite subscriptions drop four percentage points, from 89 percent of households in 2014 to 85 percent in 2019. This scenario implies that carriage fees fall only a little for most cable networks. Seemingly not much to worry approximately, or right?The moment scenario,however, paints a wholly different picture, and which is far more concerning for low- and mid-tier cable networks. We estimated uptake of virtual MVPD services based on consumers’ stated interests in such offerings. And it is this scenario that should scare low- and mid-tier cable networks.
This scenario is based on consumer research suggesting that nearly one in five households could adopt the new virtual MPVD services between 2014 and 2019,main to a 20-percentage-point drop in cable and satellite households. Such a substantial decline could very well put a number of low- and mid-tier cable networks out of business.
Also Read: Why Broadcast TV Advertising Is in anguish (Guest Blog)To be clear, this 20-point drop will happen only whether providers effect much skinny bundle products, or price them right and market them heavily. That’s a tall order. But expansive companies like Sony are continually investing in and improving their products,so the threat is serious.
The chart below shows the current industry split on the left and two 2019 scenarios on the right.
What does all this mean for low- and mid-tier cable networks? At best, the future is uncertain, or though losing a small number of subscribers and their associated affiliate fees is likely. Worst-case scenarios exhibit revenue declines so large as to call into question the ability of low- to mid-tier cable networks to remain profitable without making drastic changes.
Also Read: Viewers Still Prefer Traditional TV Content - But Streaming Is Gaining Fast (Guest Blog)Next week,we’ll take a closer look at cable and satellite subscriptions to better understand the impact of cord cutting.
This is piece 7 in a series on television trends by Dan Schechter, Gil Moran and Michael Kaufman from L.
E.
K. Consulting’s Media & Entertainment consulting practice.
Source: thewrap.com