How Long will the Cable Bundle Survive?

Now that third quarter reporting season is largely behind us, it’s worth stepping back from the numbers and delving a little deeper into what media CEOs had to say on the traditional cable bundle. It’s clear that the bundle is starting to evolve, but no one is quite sure what that will end up looking like. And no one wants to lose any money in the process, which may slow any radical changes to the market.

Disney
Disney is doing some experimenting with the NBA on an OTT product, but that doesn’t mean it’s looking to take ESPN over-the-top any time soon. “We also have a priority … to do whatever we can to make sure that the multichannel bundle is sustainable and valuable and continues to add value to consumers, because it is a more competitive marketplace today than it has ever been,” CEO Bob Iger said during the company’s earnings call. “So, we don’t feel a compelling need to take a product to market right now. If the bundle were to break up, which we don’t foresee happening anytime soon, we are very well-positioned to move very quickly to take advantage of, I will call it a broadband-only universe…”

Comcast/NBCU
Steve Burke raised eyebrows on Comcast/NBCU’s earnings call when he said that CBS All Access and HBO’s upcoming standalone broadband services aren’t really OTT offerings. “If you define over-the-top as coming over the top of existing distributors and going direct and bypassing existing distributors, I think both HBO and CBS are trying to add to their existing ecosystem,” he said. “And it’s going to be very interesting and I think challenging for them to go and try to attract new customers into that ecosystem without cannibalizing existing customers. The existing customers that are sold through cable and satellite are extremely high margin. So even if they sell at $15 a sub, … they have got to be very careful with cannibalization.”

AMC Networks
Josh Sapan gave a lengthy answer to the question that seemed to basically say that AMC Nets likes its current plan of relying heavily on SVOD—with customers able to binge a past season right before a new season debuts through the traditional MVPD platform. “Our general point of view has been… there seems to be a trend toward content that is fairly constant. [People will watch] with a little bit more premeditation,” he said. In other words, there will be less channel surfing and stumbling onto content, and more appointment viewing. “We’re syndicating 9 to 12 months later for largely the SVOD world. And we’ve also had pretty good success in transactional stuff in digital,” he said.

Cablevision
Cablevision has always held an a la carte view of the multichannel world, but CEO Jim Dolan doesn’t think the stars are aligned quite yet. “We’re starting to see a significant number of suppliers start to move in this direction. But if you look at their pricing, they’re priced significantly above what we charge the consumer for them,” he said. “So I don’t know that it’s necessarily disruptive to us yet as a multichannel provider, but we’re keeping our eye on it. Ultimately, cord-cutting and going over-the-top is something that we do believe is going to happen, and we’re preparing ourselves for it.”

21st Century Fox
Chase Carey declared that the traditional cable bundle is “fraying at the edge.” Fox is doing its own work on how to best to develop opportunities, he said, adding that some of these OTT offerings are likely to emphasize the attractiveness of bundled content. “We believe customers will want a bundle of programming. It just may be a different bundle and different proposition,” Carey said.

Charter
Plagued by high programming costs, Charter CEO Tom Rutledge seemed excited about the chance for some revisions to the traditional bundle. “To the extent that programmers voluntarily break up the very fat, basic bundle that they have put together contractually, would be an opportunity for us to actually build a more compelling product,” he said, adding that cord-cutting tends to be driven more by costs than content. Rutledge also made it clear that despite the changes in the marketplace, Charter has no strategy or plan to abandon the video marketplace. It’s expensive, but “people want it. People love it,” he said.