When I read my colleague Tara Lachapelle\u2019s column on Wednesday about how the \u201cgreat unbundling\u201d of cable television could turn into the \u201cgreat re-bundling,\u201d I had to chuckle. It was inevitable that once consumers got a taste of what an unbundled world looked like, they would begin to appreciate some of the virtues of the once-despised cable bundle.<\/p>\n
Yet not many people realized that a decade or so ago, when talk about a-la-carte television (as unbundling was then called) was all the rage. Back then, it seemed so simple. As cable bills grew more expensive, consumers questioned why they were forced to take \u2014 and pay for \u2014 300 channels when they only really watched 9 or 10. Wouldn\u2019t it make more sense to just get the stations they cared about? More to the point, wouldn\u2019t it be cheaper once they were rid of the 290 stations they didn\u2019t want? Obviously, the bundle was the problem.<\/p>\n
In Washington, two successive Republican chairmen of the Federal Communications Commission, Michael Powell and Kevin Martin, were big advocates of a-la-carte television back in the 2000s. Gene Kimmelman, an executive with Consumers Union, the publisher of Consumer Reports, told me in 2007 that a-la-carte television \u201cwould create marketplace pressure to reduce prices.\u201d I wrote about cable television frequently in the mid-2000s, and the reader feedback was almost unanimous. \u201cWhat we really need is a la carte TV,\u201d one reader wrote. \u201cThat way I can buy what I want rather than what someone forces into my TV.\u201d<\/p>\n
The one person I knew who never bought the hype was a Wall Street analyst named Craig Moffett. Today, Moffett is a partner at MoffettNathanson LLC, a research boutique he co-founded in 2013. When I first got to know him, he was with Sanford C. Bernstein & Co. LLC covering the telecom and cable industries. I recently went back and looked at his old research \u2014 not only because it has turned out to be prophetic, but because a-la-carte television is a good example of why we should be careful of what we wish for.<\/p>\n
What Moffett understood, and unbundling\u2019s proponents didn\u2019t, was that the economics of cable was, in one important sense, illusory. Cable companies paid stations based on the number of total subscribers \u2014 not on the number of people who actually watched. This system had two big benefits. It allowed niche stations without a lot of advertising to reap enough revenue to make a go of it. And it allowed the more popular stations to charge more for advertising than if they were unbundled.<\/p>\n
Without the cable bundle, Moffett said, many of the niche channels wouldn\u2019t survive. And the bigger ones would have to charge so much that it wouldn\u2019t be long before consumers were paying more for their 10 channels than they had for 300.<\/p>\n
One example he used in a note to clients in 2007 was Black Entertainment Television. Without the cable bundle, Moffett estimated that BET would need to raise its subscription price by 588% to maintain its revenue at the time \u2014 and that would have only been possible if every African-American household in the U.S. subscribed. \u201cIf just half opted in \u2014 a wildly optimistic scenario \u2014 the price would rise by 1,200%,\u201d he wrote.<\/p>\n
Moffett saw early on that streaming, barely a blip on the horizon, would disrupt the bundle. During this past decade, millions of American households have cut the cord. Perhaps more important, according to one survey, almost three-fourths of all U.S. households subscribe to at least one streaming service like Netflix or Hulu.<\/p>\n
Streaming obviously has a lot of upside. The quality of a typical, streamed TV show today is superior to the vast majority of shows the networks used to offer. Being able to watch on demand is a blessing. The fact that shows on Amazon Prime or Netflix have no ads, well, who doesn\u2019t love that?<\/p>\n
But there have also been downsides, just as Moffett predicted. Let\u2019s face it: you\u2019re not really saving money. I pay $15.99 a month for a Netflix premium subscription, $11.99 for Hulu premium (which means no ads), $14.99 for HBO NOW, $11 for Showtime, and $4.99 for the new Apple TV service. If I decide to add Disney+ that\u2019ll be another $6.99 a month.<\/p>\n
Because I\u2019m a sports fan, I need a way to get ESPN and ESPN 2, which remain tethered to the bundle because their costs are so enormous they would simply be unaffordable as stand-alone streaming services. I\u2019ve been using PlayStation Vue\u2019s mini-bundle, which costs $54.99. Sony Corp. recently announced it will be ending the service at the end of January, so I\u2019ll have to find a replacement. But they\u2019re all in the same basic price range.<\/p>\n
When you add it all up \u2014 something I\u2019d avoided doing until I wrote this column \u2014 it comes to $113.95. A month. Ouch. And that doesn\u2019t include the $12.99 a month I pay to be an Amazon Prime member, which gives me access to shows like \u201cFleabag\u201d and \u201cThe Marvelous Mrs. Maisel.\u201d<\/p>\n
Here\u2019s another data point. Remember Moffett\u2019s prediction about what would happen if BET left the bundle? We now have the proof. Cable subscribers pay 27 cents a month for BET, according to research from Kagan, a media research group within S&P Global Market Intelligence. A subscriber to its spanking new streaming app, BET Plus: Try $9.99. So much for all the money we were going to save.<\/p>\n
The other problem, as Tara noted in her column, is the frustration that has come with dealing with all these different services. It means \u201cknowing which TV programs and movies reside where, having to toggle among those different apps \u2014 which isn\u2019t as smooth as simply channel-surfing \u2014 and managing multiple monthly subscriptions,\u201d Tara wrote.<\/p>\n
Wouldn\u2019t you know it: Moffett saw this coming too. In 2006, he wrote a tongue-in-cheek note to clients from sometime in the future. Streaming, he predicted, had become a burden:<\/p>\n
The complexity was overwhelming. Forgotten passwords. Balky navigation. And lord, were the subscription fees astronomical, what with the average consumer having to sign up for six or seven different companies\u2019 offerings in order to satisfy all the different members of the family.<\/p>\n
The solution, Moffett projected, would come from a clever entrepreneur with a once-in-a-lifetime idea:<\/p>\n
What if we could aggregate all the channels in one place? Disney, Fox, Turner, ABC, NBC, YouTube, CBS, MTV, the whole works, accessible from a single source. For one monthly subscription, we could bring viewers all of this amazing content, smoothly and easily! One navigation framework. A single interface. One bill. All the channels at your fingertips. And even huge libraries of content, available on demand!<\/p><\/blockquote>\n
We\u2019re not there yet. But we\u2019re heading in that direction. It won\u2019t be cheap. But I have my own prediction: This time around, nobody\u2019s going to be complaining about the bundle.<\/p>\n
Now read: Netflix can\u2019t kill DStv\u2019s Sunday night movie<\/a><\/h3>\n","protected":false},"excerpt":{"rendered":"
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