With HBO and CBS planning
stand-alone streaming services, the oft-maligned pay-TV bundle has begun
to loosen. But it’s not clear the brave new streaming world that
replaces it will actually be cheaper for consumers.
By
offering their networks directly to consumers via the Internet, HBO and
CBS are cutting out the middleman—cable and satellite companies—and
potentially undermining the backbone of the television business.
On
the surface, this is seen as a win for people frustrated with rising
monthly television bills and paying for lots of channels they don’t
watch. Other networks are following the lead of Time Warner’s HBO and
CBS, including Univision Communications Inc. and possibly Showtime,
which is a unit of CBS Corp.
Walt Disney Co.’s ESPN is also developing online-only platforms that would be offered separate from traditional channels.
“It
seems to me that a la carte, which seemed like a distant reality a few
months ago, has become a much more viable option,” said Tuna Amobi, an
analyst at S&P Capital IQ. “This is a watershed moment for the
industry.”
But cord-cutters
should be careful what they wish for. A future where television viewers
subscribe to each channel individually could be cheaper for young people
who only watch two or three channels, industry executives said. But
analysts say that for households filled with people of differing tastes
or fans of many channels, this future could make the average cable TV
bill — which hovers at around $90—seem like a bargain.
Driving the change is the
growing popularity of online streaming services from Netflix Inc, Hulu
and Amazon.com Inc.’s Prime Instant Video. In response, many networks
have started making their own content available online or selling it to
such services, but usually after it debuts on their linear service.
Now,
though, as the number of people either abstaining from pay-TV or opting
for smaller packages with fewer channels grows, traditional networks
are starting to hedge their bets. “There is no question that streaming,
in terms of consumer options, is becoming a reality,” said Mr. Amobi.
Technology
may be doing what consumer advocates and many lawmakers have long
argued for—making programming available on an a la carte basis, which
they believe will result in smaller bills.
Some
analysts however, paint a grim portrait of an unbundled world. Laura
Martin, an analyst at Needham & Co., estimates that unbundling would
drain half of the revenue, or $70 billion, out of the television
industry. Moreover, today’s hundreds of channels would shrink down to
about 20, she wrote. That is because advertising would decrease
substantially on channels with reduced audience reach, forcing consumers
to pay the entire cost of running the channels, instead of splitting
that cost with advertisers, as is done in basic cable.
Sports
networks could be most at risk in an unbundled world. About half of the
subscriber fees paid each month by consumers go to channels with
sports, even though these channels account for less than a quarter of
viewership, according to Nielsen data analyzed by Needham.
If
ESPN were taken out of the bundle, for example, it might need to cost
as much as $30—instead of the roughly $6 per subscriber it currently
charges as part of the bundle, according to SNL Kagan—to recoup its
losses from reduced distribution and continue to afford its content.
Programmers, meanwhile, are
protective of the bundle because it allows for the pairing of weaker
channels with strong ones. Content companies often offer discounts to
distributors for taking weaker channels along with strong ones.
“All
these things are so much more expensive when you separate them out,”
said David Bank, an analyst at RBC Capital Markets. “You are going to
have to pay more for less choice.”
***
[I don't know. Something about this article smells fishy.]
No comments:
Post a Comment