Rising Video Pricing, Skinny Bundles Could Mean End for Some Programming, Summit Told
Price increases in the cable industry could be reaching a point where cable distributors' dropping particularly expensive programming -- such as Cable One's and Suddenlink's drops of Viacom in 2014 -- could begin to snowball, said cable experts and insiders. Only smaller distributors have dropped programming thus far, but the next couple of years might see large distributors drop large programmers, BTIG analyst Richard Greenfield said at an American Cable Association's summit Wednesday. ACA members "are looking at these kinds of opportunities really seriously," CEO Matt Polka said separately, but "not everybody within our membership is there yet.”
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Cincinnati Bell will roll out its MyTV skinny bundle offering of 130 channels for $36 Monday, with options to add other ties, the aim being to fill in the gap between basic service and the first premium tier, said Mike Morrison, director-Fioptics Services. He likened the MyTV offering to a similar package from Verizon. ESPN sued Verizon over Custom TV (see 1504270071). Cincinnati Bell didn't negotiate any new programming contracts for MyTV because it and outside legal counsel believe its offering falls within its existing contracts, he said. The lineup for the skinny bundle was based on legal issues and contracts, plus set-top box data on what channels were in particular demand, Morrison said.
Many cable operators are holding fast to video for now. Asked about being in the video business at all, Morrison said Cincinnati Bell has been overbuilding Time Warner Cable's fiber network, but "we need every bullet in our gun" when competing with TWC. "TV is still a good business," ACA Chairman/MCTV President Robert Gessner said.
Some said the bundle as a concept has a long tail. "People love bundles -- Netflix and Amazon are just new forms of bundles," Greenfield said. "HBO got Sesame Street and Jon Stewart to build their own bundles." He said the bump in video subscribers for some cable operators in the most recent quarter was due to smaller bundles and cable tying broadband offerings to video.
But escalating video costs eventually will lead consumers to seek alternatives, with new video models likely coming from such technology players as Apple, Google and Sony, said Public Knowledge President Gene Kimmelman. Technology companies and the media industry are in a culture clash, he said. "The notion of Google or Apple paying to carry someone is anathema to them: 'They should die to be on my platform.' Their value structure comes from a whole different revenue model" than traditional cable companies, Kimmelman said.
Numerous cable channels likely would go away if skinnier bundles became the norm, as programmers are forced to consolidate their offerings, Greenfield said. "I don't know if VH1 makes it into a lot of smaller bundles, or Spike makes it into smaller bundles," he said. "There's no way you squash the bundle and keep all the channels." While sports networks are the most powerful, they also are the most expensive, and might also fall victim to at least some skinnier bundles, Greenfield said. But no programmers likely flourish in a skinny bundle world, he said.
Major sports providers like ESPN won't go direct to consumer until there's evidence of an audience willing to pay for it, said Sandy Brown, One World Sports Network CEO. Networks are likely regretting some of the long-term contracts they signed with major sports leagues because of the high costs locked in, Greenfield said. Pointing to declining live viewership, he said, "You can't keep charging more for something people are using less.”