It's The End Of The Bundle As We Know It

With apologies to R.E.M., it looks like the end of the bundle as we know it (and I feel fine).  Prophetic perhaps, but the stock market these last couple of days sure feels like the bundle today is broke and that media companies will be the losers. 

For cable, the bundle was originally laughed at when Cablevision first introduced a triple play bundle of cable, phone, and broadband for under a hundred dollars a month.  And with an assortment of cable networks, consumers felt like they got a good deal.  Other cable companies scoffed but soon found themselves following along as it proved to be a very successful marketing strategy.

Fast forward almost 20 years and cable subscription fees have grown faster than inflation.  Cable operators kept aggregating more and more networks to their line-up and license fees of all networks kept rising.  And so did our cable bills.  We may have enjoyed the wide variety of programming and the rise of on demand viewing, but we were also inundated with more and more commercials.  For consumers, a breaking point was near and the solution has been cord cutting.

But in order to enjoy content, alternatives also had to be found.  The quantum leap happened as Netflix emerged with a broadband streaming solution at a price point of under $8 a month.  Amazon Prime, Hulu, and others saw a shift occurring and have found a way to attract viewers with low fees, syndicated and well known content, and as to really entice viewers, original content to drive adoption.  For price/value, cable was losing the race.

Unfortunately cable networks are not about to lower their license fees that they charge operators.  So cable operators have now started to drop networks off their basic line-up and create skinnier versions at lower costs.  For some cable networks, it is a double hit; lost subscribers first due to cord cutting, and second, drops in their subscriber base due to being dropped from basic levels of service.  With lower subscriber bases, advertising revenue creates a third hit to the networks bottom line.  Verizon FIOS has announced such a move and Charter Cable is not far behind.

Today, the bundle is not the technology choices; we have essentially watched as the triple play can essentially be managed through the broadband fiber with web, streaming, and VOIP.  The bundle is now the aggregated content that we are consuming across our devices.  And price elasticity is playing a huge part.  AT&T, now with DirecTv in its stable, is trying its own bundle of cellular and satellite to drive subscription.  Netflix, Amazon, and Hulu continue to advance with more original content to their bundle of content. 

Media networks that own their content should find that they will survive cord cutting with more platform alternatives to place their content.  And branded opportunities within the content will drive forward more advertising revenue as well.  For cable operators, the bundle as we know it has changed; Driving value of the fiber pipeline to the home, services that rely on the broadband pipe, and TV Everywhere content accessibility at more competitive price points will keep the business thriving.