Nope, Sorry, You Should Still Shut Up And Love the Cable Bundle

Everyone seems to be cheering yesterday’s announcement by HBO CEO Richard Plepler that, starting next year, its content will be available as a standalone over-the-top streaming service. Boom! No cable or satellite subscription needed for “Game of Thrones” anymore! And now CBS is launching its own over-the-top streaming service, with live streams from a dozen markets plus a backlog of current and “classic” content.

For a lot of TV junkies who have been itching to ditch their cable bundles, this is like Christmas morning.

Hard truth for you: That big, bad bundle that everyone loves to hate is what makes great content possible.  And all you are really doing is trading one big bundle in for a bunch of “mini-bundles” and a new potential cost for data speeds. I can promise you that things won’t be easier.

The economics of the cable bundle does not, despite popular belief, mean that you’re paying for stuff that you don’t watch. Remember, for every channel you don’t watch, there is someone else not watching your favorite channels and paying for those. This means that unbundling will make what you do watch proportionally more expensive. Basically, you will end up paying the same price, but will now have less choice of content -- really. I’ve got a good gym analogy for you that might help explain that one.

And it’s the predictable financing model provided by the bundle that allows a cable channel to make big creative investments. TNT spent a lot of time syndicating “Law & Order” reruns before it was in a position to create original series like “The Closer.” There were many, many years when if you turned on FX during prime time, you’d encounter some ‘80s action movie with a lot of pyrotechnics (not that there’s anything wrong with those) rather than a new episode of “Sons of Anarchy” or “American Horror Story.”

Consider this: A few days ago, WGN America, which is far from a major cable network, announced the renewal of its surprise breakout hit “Manhattan” for a second season. WGN had barely dipped its toe into original scripted content --  it's not cheap to produce a series with high-quality actors, period costumes, and the occasional bomb going off. And a lot of people will enjoy that show “over-the-top” in second windows on Netflix, Amazon or iTunes someday.

Who should they be thanking for that? Cable-bundle economics.

And, the biggest kicker of all, as I pointed out, is that even Netflix and HBO are in effect their own mini-bundles, taking those successful economics of cable and applying them to smaller batches of content. My Netflix subscription is paying for “House of Cards,” which I’m addicted to, but I just can’t get into “Orange is the New Black.” Should I be asking Netflix to “unbundle” its programming? And this is a really fun one to consider: Much more total time is spent on Netflix watching TV shows that were funded by cable bundle economics than those excellent-but-expensive Netflix originals. Where do those shows come from when the bundle goes away? Probably each to their own little bundles, which people will have to pick to subscribe to. But I digress.

Likewise, HBO has been around since 1972. (Bet you didn’t know it was that old.) Its breakout original series, “The Sopranos, premiered in 1999. That’s 27 years of first-run movies and pay-per-view boxing -- all funded by subscription -- before the company had built up the stability and financial prowess to start funding original programming on the level of “The Sopranos” and “Boardwalk Empire.”

And keep this in mind, so-called “cord-cutters”: There are only so many mini-bundles that people will pay for. The fully “unbundled” model that so many people are cheering about right now is at odds with the industry’s ability to create the engaging, high-quality, diverse breadth of content it finally can after a half-century of cable television. (Oh, and none of it has advertising, something else that has subsidized the creation of the content we all love for so long. But that has a whole set of other problems.)

Is HBO's availability to people who can’t afford a full cable package a good thing? Of course! But is this really unbundling -- or just creating a new set of bundles that will force consumer choices and new challenges like “How much should I pay for that ultra-fast Internet service so my Netflix, Hulu, and HBO stream perfectly every time?” You know, like TV always does now.


5 comments about "Nope, Sorry, You Should Still Shut Up And Love the Cable Bundle ".
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  1. Leonard Zachary from T___n__, October 16, 2014 at 3:24 p.m.

    Unfortunately the cable bundled economics has been abused vis-a-vis lack of competition as evidenced by that great customer service and the public has significant mistrust.

  2. Greg Alvarez from iMeil, October 16, 2014 at 4:33 p.m.

    One very important thing you are not including in your statement: advertising income.

    I first was a DirecTV subscriptor --when it was operating in México. One year ago cancelled my subscription to Dish México --after almost five years-- 'cos almost 90% of its daily content was a repetition.

    So, I was hoping the channels I used to watch most of all (HBO, AXN, Universal, Warner, Fox, ESPN, Sony, SyFy) take a steep aside and go by itselves.

    Returning to the "advertising" topic: just imagine how many brands would be interested in joining the HBO ranks to appear or be part of their big series (GoT is coming and there is time enough to plan and implement an ad plan/project).

    If brands come with HBO (think about co-marketing), I won't be surprised if HBO offers a $1 (one dolar) monthly fee. 114 worldwide millions (not including its aprox. 34 millions on the US) is not really a bad monthly income base.

    What HBO is doing is adapting itself to current times, where all things are going 'personal' (remember one-to-one marketing?) and when TV exposure is decreasing due to new and better (for consumers) devices (computers, laptops, smartphones, tablets, smart-glasses).

    Best of all, HBO is going with evolution... while you're suggesting stay with the actual status quo. I for one will look for this kind of services. Let's see what the future has in store for us.

  3. Joe Marchese from true[X], October 16, 2014 at 4:37 p.m.

    Greg - You are right that I don't spend a lot of time in this case focusing on all the lost advertising money. But I do call it out at the end of the second to last paragraph. These over-the-top services do not have an ad model that replaces broadcast ad model.

  4. Bob Hamilton from New Radio Star, October 16, 2014 at 4:39 p.m.

    First of all it doesn't have to be either/or...Good article, good thoughts, but, I just did the $120 a month Directv bill (without HB0 or any other movies channels) gets cut in half when I get to choose just what I watch...sports, news, movies, some network dramas...and most importantly I am it from wherever I am...The $120 a month bill will buy all the $6 a month subscriptions I could possibly want. It's an exciting new day and the companies are smart to be making the move to the Net..keep coming!

  5. Joe Marchese from true[X], October 16, 2014 at 4:41 p.m.

    Bob - Very interested in your math. How did you come up with the price of ESPN on a pure over-the-top offering? News?

    That said, I agree that you CAN cut the price, but you also will lose choice. You wouldn't have paid for AMC 10 years ago, like a lot of people, and a lot of those people look forward to Walking Dead every week now.

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