Bundle in the Jungle: Evaluating An Entertainment-Only Virtual MVPD

The potential introduction of an entertainment-only skinny bundle has been a hot topic since YouTube TV and Hulu brought the number of major virtual MVPDs on the market in the US to five. Discovery CEO David Zaslav, Viacom CEO Bob Bakish and Turner chmn & CEO John Martin have all recently sought to bring attention to the need for such an offering.

Their criticism of skinny bundles— which Zaslav referred to as “overstuffed turkeys”—is that prices are too high due to the cost of carrying sports and broadcast channels that only some consumers want. Nets from all three of those programmers have been left out of at least one major skinny bundle, which they attribute to those services ponying up to carry sports and broadcast nets.

Univision evp, content distribution Eric Ratchman expressed similar frustration, as neither YouTube TV nor Hulu carry his company’s channels. “They’re challenged on their margins after getting the four core broadcasters in at their $35 retail price point, that they’re just under water,” he said. “Paying for us on top of them at launch, they have not been willing to pick us up.”

Ratchman said Univision—like Discovery, Viacom and Turner—sees opportunity in an entertainment-focused offering. Given that 90% of Univision’s audience also watches English-language programming, he believes viewers would buy in.

Still, Hulu svp & head of distribution and partnerships Tim Connolly, whose company is the most recent entrant into the skinny bundle field, is skeptical about demand for a linear entertainment-only bundle.

“We just don’t think that’s nearly as compelling because, in terms of live services and current-season services, sports and news are the cornerstones of the MVPD business,” he said. “There are so many ways you can get entertainment services—whether that’s through Netflix, our SVOD services or all of the premiums now going direct to consumer; there’s lots and lots of ways to get entertainment services.”

Ultimately, the Hulu exec said it comes down to consumers finding what they most want.

“If the Discovery networks are critically important to you as a TV viewer, when you look at our content lineup, you’re just not going to buy us,” he said.

While sports are certainly a major driver of live TV viewership, it is unclear whether sports fans are who virtual MVPDs should be targeting. BTIG analyst Rich Greenfield said sports fans are less likely to leave traditional cable given that they are “super served” in big bundles.

“So, if you believe the sports fan is staying the big bundle, the question is what’s the most compelling bundle for non-sports fans,” Greenfield said.

“If you’re looking for a broad cross-section of general entertainment networks, kind of the niche general entertainment networks—History Channel, Nat Geo, Nickelodeon, Discovery ID—there’s a whole wide array of family-fresh, kid-skewing networks that could probably be made available for $15-plus.”

Greenfield added he would be surprised if such a package doesn’t surface within the next six months, though it remains unclear who will bring it to market. He pointed to legacy MVPDs as possible players, but also mentioned Amazon and Philo.

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