The atmosphere on the Disney Bundle Celebrating National Streaming Day at The Row in Los Angeles on May 19, 2022.
Presley Ann | Getty Images Entertainment | Getty Images
This 12 months proved to be yet one more tough one for pay TV, as more people cut the cable cord.
Nevertheless it wasn’t exactly kind to streaming services, either, as platforms handled subscriber declines, slumping ad revenue and stubborn losses while Netflix continued to say its dominance.
Still, the age of the cable bundle is giving solution to the era of a recent sort of bundle that would give each streamers and cable providers a path forward. Media executives told CNBC this month that 2024 could finally be the 12 months that media firms get serious in regards to the bundle.
“The Charter-Disney deal was an indication of the times,” said Macquarie analyst Tim Nollen.
Disney and cable giant Charter Communications battled over fees in the course of the lead-up to the National Football League season, with Charter CEO Chris Winfrey saying it wasn’t “a typical carriage dispute.” Disney-owned channels, including ESPN, ceased broadcast for thousands and thousands of consumers of Charter’s Spectrum service for nearly two weeks.
The blackout led to September, hours before “Monday Night Football” was set to kick off on ESPN, with a deal that gave Spectrum TV Select Plus subscribers access to the ad-supported tier of Disney+, in addition to ESPN+.
Similar arrangements could well emerge in 2024, given the broad subscriber bases and positive revenue implications for pay TV and broadband firms, Nollen added. Liberty Media Chairman and cable TV pioneer John Malone, who’s also on the board of Warner Bros. Discovery, earlier this 12 months predicted more integration of streaming services into cable bundles.
Mergers and acquisitions would also result in more bundling. Paramount CEO Bob Bakish and Warner Bros. Discovery CEO David Zaslav met last week to debate a possible merger of the 2 firms, although talks are in early stages.
Despite the demand for a streaming bundle, top players have historically been apprehensive to make such a deal. Firms would should navigate the calculus of average revenue per user, or ARPU, and subscriber growth when offering their services at a reduction.
A reduced bundle could shrink ARPU, but when subscribers grow leaps and bounds on account of the bundle, it could offset that loss. Media firms that also house cable networks could possibly be concerned that a streaming bundle would cannibalize their cable plans.
Top streaming platforms already made some big moves in 2023. Disney agreed to purchase Comcast’s remaining one-third stake in Hulu in a long-expected move. Disney also began rolling out its combined Disney+ and Hulu platform earlier this month, with a full release coming in March 2024. Disney already offers a three-way bundle of Disney+, ESPN+ and Hulu.
Paramount Global and Apple earlier this month were reported to be considering a bundle of Apple TV+ and Paramount+. Verizon, which offers cellphone and residential web plans, was reportedly gearing up to supply a bundle of the ad-supported tiers of Max and Netflix to Verizon customers for $10 a month, $7 lower than subscribing individually.
The combination of streaming into the pay TV bundle could shape up to supply some much-needed upside for the industry. Ad revenue has slipped considerably for pay TV and is on pace to face an 18% decline this 12 months, in accordance with media investment firm GroupM. The ad-supported tiers of streaming platforms, which are sometimes included in bundles, drive higher ARPU for cable firms on account of the ad revenue generated, Nollen said.
Much much like pay TV providers, streaming platforms have needed to contend with subscriber losses over the past 12 months, albeit at a slower pace. Streaming leader Netflix, for instance, has pivoted to lift the worth of its plans while also rolling out ad-supported tiers to offset subscriber losses.
Zaslav warned last month of a “generational disruption” and pointed to the corporate’s streaming service Max, which he said at one point was “losing billions of dollars.” Warner Bros. Discovery did, nevertheless, turn a profit in its streaming segment, in accordance with the corporate’s most up-to-date quarterly earnings report.
The Disney-Charter deal offered a framework for cable firms to transition their business models into the streaming era and stabilize subscriber trajectories, in accordance with Ampere Evaluation.
“Charter gets to guard and hopefully grow pricing on its subscriber base,” Nollen said. “Disney and Warner Bros. Discovery have probably the most potential upside” from the bundling trend “given the breadth of content on their combination of services and the undeniable fact that they’re starting to bundle those together already.”
Disney, Warner Bros. Discovery, Paramount, Netflix and Apple didn’t immediately reply to CNBC’s request for comment.
— CNBC’s Alex Sherman contributed to this report.
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