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David Poland

By David Poland

Delivelution: April 2015 – Pt 2, Meet The New Bundle. Same As The Old Bundle

Gosh darn, the media luvs change. Any kind of change (aside from losing their particular jobs). Gotta have it. Reporting “nothing has changed” or ” there has been incremental change” isn’t very exciting.

Almost four-and-a-half years ago, ESPN started streaming its networks live. For an even longer time, the sports programming leader has made programming that didn’t make it onto the networks available for streaming and PPV.

Another Disney television network, ABC, has been streaming their programming for almost two full years.

So why don’t these leaders in emerging media technology seem to ever get mentioned in stories about the future? Because they aren’t cord-cutting tools.

Now, as ESPN streams on Dish’s extremely limited streaming Sling TV network, suddenly they are a part of the conversation again… but only as a part of the cord cut.

Let’s process this… Disney makes their ABC broadcast network available to stream to scores of millions as a free part of their cable/satellite (MVPD) subscriptions and… not a story. But Viacom’s CBS makes their network available to a couple hundred thousand (maybe) cordcutters for $6 a month and BOOM… the world is changing.

If you want to follow a niche group that likes to pose and whine constantly, feel free. But that never ends up being the story.

One journalistic axiom that I live by is “follow the money.” And the story here is about what will happen when 80 million+ households are ready to take action.

There is no cliché more worn out that “everyone wants what they want when they want it and they want it for free.” Yet this is how the evolution of content distribution is constantly covered. Make no mistake, there is an evolution going on. The vast number of ways that content will soon be distributed constitutes an immense change.

But here is what has not changed, and won’t change. 60 seconds in a minute, 60 minutes in an hour, 24 hours in a day, 168 hours in a week. The vast majority of people will spend 35-56 hours of every week sleeping. That same majority will spend between 20-60 hours productively working (inc school, etc) during most weeks. So what does that leave? 20-60 hours a week entertaining ourselves in some form? Food, sex, bathing, thinking… all eat into that.

And the value of money will change, but people will basically make similar amounts now and 50 years from now. And no matter how excited the press gets about change, until filmed entertainment can fully replace food and/or drugs and/or alcohol and/or sex and/or sleep, the average American household will not be spending a lot more, by percentage, on these things than we do now. $250 – $350 a month is about the cap.Of course, on the high side, that adds up to over $400 billion a year. The question is, how does it get cut up?

Now… let’s discuss the bundle.

As soon as you put a second piece of entertainment together with another to increase value, you have a bundle. Netflix and Amazon and Hulu are all bundlers. They bundle content with the idea of appealing to the widest possible group, few of whose tastes will match consistently through their viewing. Meaning… if one-third of the Netflix subscribers watch a show like “House of Cards, “that’s a huge win for Netflix, as they have created unique value for one-third of their buyers. Maybe another one-sixth subscribe for old TV shows. Another one-sixth like the range of docs available. Maybe one-third can’t live without the kids’ programming. Etc, etc, etc.

This is also the kind of bundler that the major networks are, except that their targets are even wider. They get paid based on how much everything they air gets watched, not by subscriber purchase and loyalty. Also, they have historically lived with the limits of the 168-hour week or more to the point, 22 weekly hours of primetime and a wide variety of daytime and latenight chunks. So, for instance, today (Monday) on ABC, the network will program, on most affiliates, 16.5 hours of the 24 hour day. On this upcoming Sunday, they have 12 hours of programming. Fox, on the other hand, will only program two hours of the 24 hour day of its affiliates today (Monday).

MVPDs (cable/satellite) are a third form of bundling, pulling together an attractive series of networks to reach an audience even wider than the broadcast networks. These companies were tasked, at the start, with serving the communities to which they were given exclusive rights on a town by town basis. Local stations were included under “must-carry” rules. Networks like TNT and USA used major league sports to make them semi-unofficially must-carry (as in, you need to have them so your constituents can see their local teams when they are televised nationally).

Bu things changed dramatically as (and there are lots of pieces, but sticking to my point here) the MVPD world solidified and what were specialized networks realized that they could compete with the more mainstream cable networks and even the broadcast networks. Cable nets like MTV and Bravo and AMC and History realized that they had 70 million-plus (many of them around 100 million) potential viewers to work with, same as the major broadcasters had sole access to for years. Why program only niche shows hoping to find hundreds of thousands out of an interest group of a few million when they could shoot for millions of viewers.

And as those higher pursuits expanded (along with the costs), those networks grew more important for those MVPDs to keep their subscribers and the shoe changed feet. Now the networks had an advantage (as did ESPN and other older nets). But there were the broadcast networks, who still draw more viewers overall than any other segment of the MVPD content universe, spending lavishly and creating hundreds and thousands of hours of new programming annually and not getting paid by the MVPDs. And so, that shifted and now they are – for the most part – being paid to be available via your cable or satellite provider.

In other words, your cable company started paying a la carte prices to hold together your bundles, all the while listening to you, the consumer, complain about 500 channels with nothing on.

Is this the only reason your cable/satellite bill has been steadily/sneakily rising over recent years? No. But it is a big part of the cause.

So now we get to cutting the cord.

If you just say, “Man, I don’t need all of that!,” God bless you and opt out of this conversation now. You are part of a very small group of people who are just fine making that leap. Congratulations.

As for the rest of you… your decision is really about choice. There is expense. And there is easy, wide-open access. And there is the vast space in between.

Here is what is not going to happen… you are not going to get to pick the channels you like and only those you like and shave 50 cents or a buck off of your bill for each one you eliminate.

On my DirecTV, the first 70 channels are committed to local “free” TV. 70 – 100 are all shopping channels. 101-200 are all DirecTV PPV or other in-house programming. 201 – 221 are news and sports channels (some very specific, like The Golf Channel). More shopping from 222 – 230. 231 – 288 is the meat of the cable programming… Food Network, Bravo, AMC, E!, History, Discovery, FX, A&E, Comedy Central, Lifetime, Oxygen, WE, Oprah, USA, TNT, TBS, etc. Kids programming 289-304. A bit of a mash-up until MTV at 331 which starts music and hip entertainment until 345. News channels from 346 – 360. Religion 363 – 379. Unavailable national nets from 380 – 400. Spanish-language nets from 401 – 462. DirecTV space until HBO and the premiums nets at 501, which go until 573, which is when the porn starts. The 600s are for local sports networks. The 700s are for paid access to sports. 800s are music channels. Everything 1000 – 2000 is now on-demand channels. And over that, it’s DirecTV inside baseball.

So what do I use? Not the 70 channels of free TV… but the ones I want and the others are free to me and DirecTV anyway. 201- 221 are sports channels I watch. 231-288 are core. The news channels are important to me (346-360). With a kid in the house, the Kids nets are important (289 – 304), even though he also uses Netflix all the time. I don’t watch much MTV (331-345), but it would be weird not to have it available. And the premium channels, which I am already paying for at great cost.

So… with a roughly 500 channel “basic” universe on DirecTV, I care about roughly 120 channels. Within that I could surely pare it down to under 100 channels… maybe 75. But as I wrote before… it doesn’t work like that and will never work like that.

Still, even with a priority of 75 channels (before premium nets), there is no way to achieve that bundle solely by streaming.

Rumor has it that the Apple offering will be around 50 channels… but what 50 channels?

And each of us (who do care about having a fairly broad level of access) will have to ask ourselves, what is our tipping point?

What level of inconvenience is $50 a month worth? $25 a month? $75 a month?

And this is where is becomes a giant cluster f***, because as we seek to break the bundle, we each become responsible for creating our own bundles. And that includes making sure your internet access through your home works well enough for streaming consistently and with minimal interruption.

I’m not playing the “what’s available right this second” game here. I’m taking the Playstation Vue (now in 3 cities) and the reporting on Apple to be mostly accurate. (Sling TV, as far as I am concerned, is already dead. 20 stations, no broadcast… not going to cut it. In time, it will get the networks. It will have to in order to have any chance. But it may well be too late.)

Playstation Vue is offering up to 88 channels. But the offering changes in each of the 3 cities in which Vue is currently available… and again based on the three levels of service. In all 3 cities, the cheapest level, “Access,” is $49.99 a month. In NYC, you get 53 channels at this level. For news, there is CNN, HLN, Fox News, Fox Business, CNBC, and MSNBC. For sports, there is Fox Sports 1, Fox Sports 2, NBC Sports Net, and networks that show some pro sports, TBS, TNT, CBS, NBC, and Fox. No ESPN (on this or any level). And no ABC (on this or any level). To get YES (to watch The Yankees), you have to go to the “Core” level, which makes it $59.99 a month. For kids, Nickolodeon, Nick Jr, and Nick Toons. No Disney (on this or any level).

And what about the “meat” channels I referred to earlier? Not bad. AMC, Bravo, E!, Food Network, MTV, VH-1, TBS, TNT, TCM, TLC, USA… all there. But A&E, BBC America, History, Lifetime… sorry. And logically, if those channels were to sign on, it would be another tier of $10 a month for their inclusion.

The $69.99 “Elite” level is a load of 21 unnecessary channels. If you feel strongly about having Logo (the most surprising channel to be held Elite hostage, because it seems like a political misstep) or Boomerang or The Cooking Channel, so be it. But you pretty much get it all for $59.99… but with some big holes. Add HBO Now and you’re up to $75 a month. Add Netflix, Hulu and Amazon Prime and you’re just over $100 a month. Without a DVR. With limited video-on-demand over a tightly limited period. Without a number of significant networks, including premium nets Showtime and Encore. Currently, PS Vue doesn’t stream to the iPad or iPhone, but they say that will soon change, so I won’t hold it against the service… and I will hold it against DirecTV and other MVPDs that don’t allow much live streaming of their top networks outside of the home.

But… it’s just another bundle. And even at the “Core” level, did you really ask for the Cosi Channel, Destination America, the Big 10 Network, Esquire Network, Animal Planet, Science, Discovery Family, TeleXito, etc? I’m sure some of you wanted one or two of them, but these are the networks that are noted as “unneeded” when people complain about MVPD bundles.

If I could get this for my wife’s parents, in their 70s, who rarely change the channel from Fox News, and wouldn’t worry about not having ABC or ESPN, my inclination would be to say, “sold.” Of course, they would need internet service, which they might choose not to have. They still pay all of their bills by mail.

Unfortunately, checking in with Time-Warner Cable in my neighborhood, they could have 200 channels (100 in HD) on 3 TVs with DVRs and the internet for $129 a month. Or they could pick 20 channels on 3 TVs with DVRs and the internet for $80 a month.

Now the value proposition is razor thin, at best.

The irony of all of this is that the people most anxious to cut those chords and lead the revolution are younger… and The Young are the group most focused on event moments, whether the newest TV episode or movie. Older people tend not to be as must-see focused. They are willing to wait to consume their entertainment. They don’t feel compelled to jump on Facebook or Twitter to discuss something minutes after it ended. But those younger people are happily throwing up release date hurdles for themselves and the older audiences are less willing to go through all that effort (or multiple delivery systems).

But returning to the central point of this episode… “bundle hatred” is a false premise used lazily to express the disaffection for the current, overly mature system of local near-monopolies that have lowered the bar on the need for MVPDs to aggressively service their customers in a positive way.

Many consumers (perhaps a majority) feel like their content delivery systems are too expensive and not worth the price these days. They see a load of channels in their cable/satellite guides that they never watch. And they figure that if you just trim the fat, prices will go down. They also want maximum access to content on digital platforms.

I believe that consumers will end up winning this battle, as they mostly have so far. But it will not be the revolution of which many dream. If you want to reduce down to local TV by digital antenna and the 4 big streamers (Netflix/HBO/Hulu-Plus/Amazon Prime), you are good to go for under $100 a month (including internet) for as long as the broadcasters are putting signals in the air.

But if you want to consume with some abandon, $150 – $200 a month is likely to remain the norm for a long time to come. What I see coming in a lot more content for the same overall price point. Some networks will die. MVPDs will be a part of the machinery, but will earn a lot less revenue from content sales than they have, focusing more heavily on providing internet services (as many have suggested before me).

The need to have multiple networks, like six HBOs, will dissipate. NBCUniversal has 15 of the 88 Playstation Vue channels (and a similar or bigger clock on MVPDs) currently. Occupying channel space has been a leading strategy for 20+ years, but having – for instance – both Cloo and Chiller in a digital on-demand universe seems redundant moving forward.

So maybe the bundle will only have 20 “channels,” each channel priced at various levels. But there will still likely be basic and premiums levels that cross all those channels. The difference from now is, you will be able to watch what you want wherever you want to, the DVR will be phased out with access to download any post-release filmed entertainment (and perhaps be broken into multiple windows, but not ones as seemingly arbitrary as right now), going to movies will be about that very specific experience which could well be as popular if not more popular than now, and television will fight for a few million viewers from across the globe on the nights of premieres and far more in the 2 – 3 weeks to come.

But I am getting ahead of myself. More to come…

Part 1: Unscrambling Eggs
Part 3: The Tyranny Of The Old
Part 4: $200 Billion Is Never Enough

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6 Responses to “Delivelution: April 2015 – Pt 2, Meet The New Bundle. Same As The Old Bundle”

  1. John E. says:

    Any chance of making your DP30’s available on iTunes/Stitcher as podcasts? I’ll hang up and listen to your answer off the air.

  2. Delgado says:

    You always know how to tell it like it is!

    It will be interesting to see if the coming generation continues to use their parents’ Netflix/other streaming accounts well into adulthood, the way millennials stay on their parents’ cell phone plan.

    Definitely noticing tastes changing among my older millennial friends who were cord cutters but are settling down and would rather SIT AT HOME AND WATCH TV instead of going out. They’re back on the cord because MVPDs are offering bundles where the main product is Internet access and it feels like the company is throwing in hundreds of channels for just a little bit extra.

    I think the future might be about power users, who’ll pay $3000+ over the course of a year for a wide array of channels. These are the type of people who are really into TV and are willing to pay a premium to get first access so they can talk about it online. That might amount to 20% of people. The majority of people will end up paying under $100 a month for reruns of the stuff the power users approve of. There are still people just now discovering Breaking Bad and that show started when Bush was in office.

  3. michael bergeron says:

    .. for some reason I thought this thread was going to be about Ex Machina …. i haven’t had cable for a few years, and don’t miss it, but between watching movies in theaters and blu-rays at home there isn’t a lot of time left over anyway …. about six months ago I subscribed to Netflix for 30 days but after binging on Breaking Bad and some new stuff I was watching a bunch of ’90s product (Jackie Brown, Out of Sight, et al.)

  4. Mike says:

    I’d dispute the idea that ANYONE feels like they have to have 100 channels, but my perspective is so far in the other direction that I should’t really make that claim. I cut the cord because I can get the networks over the air and really only miss two or three other channels. Sling is offering me most of those, so I’m considering it.

    The great thing about Netflix is that if you don’t have something specific that you want to watch, you have so many options (like surfing cable). It’s when you have specific things that you want to watch that it becomes an issue. I’ve satisfied that by buying season passes on iTunes and getting NFL Game Rewind.

    I don’t know if cord cutting is really going to take off, but so many people ask me about it because they really want to get off of cable. I think that sentiment is going to lead to something that will start to generate even more interest. whether it’s what David is talking about or something else, no one can really tell at this point.

  5. Eric says:

    David’s optimistic outlook on cable underestimates the sheer LOATHING that people have for their cable companies. People HATE those motherfuckers. It’s not just paying for hundreds of channels you don’t watch. It’s the shitty customer service. It’s signing up for the $99 package and getting a monthly bill for $130. It’s new customers getting discounts that you can only get by threatening to cancel. It’s the way your bill goes up by $5 every few months with no explanation whatsoever.

    Cord-cutting is appealing because people aren’t rationally evaluating their purchasing decisions and comparing alternatives etc. etc. Cord-cutting is appealing because fuck the cable company. If this was a movie then canceling your cable subscription would trigger Aretha Franklin’s R E S P E C T the minute you hung up the phone.

  6. PcChongor says:

    On a related note, it looks like the Netflix bubble is finally beginning to reach its bursting point:

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It shows how out of it I was in trying to be in it, acknowledging that I was out of it to myself, and then thinking, “Okay, how do I stop being out of it? Well, I get some legitimate illogical narrative ideas” — some novel, you know?

So I decided on three writers that I might be able to option their material and get some producer, or myself as producer, and then get some writer to do a screenplay on it, and maybe make a movie.

And so the three projects were “Do Androids Dream of Electric Sheep,” “Naked Lunch” and a collection of Bukowski. Which, in 1975, forget it — I mean, that was nuts. Hollywood would not touch any of that, but I was looking for something commercial, and I thought that all of these things were coming.

There would be no Blade Runner if there was no Ray Bradbury. I couldn’t find Philip K. Dick. His agent didn’t even know where he was. And so I gave up.

I was walking down the street and I ran into Bradbury — he directed a play that I was going to do as an actor, so we know each other, but he yelled “hi” — and I’d forgot who he was.

So at my girlfriend Barbara Hershey’s urging — I was with her at that moment — she said, “Talk to him! That guy really wants to talk to you,” and I said “No, fuck him,” and keep walking.

But then I did, and then I realized who it was, and I thought, “Wait, he’s in that realm, maybe he knows Philip K. Dick.” I said, “You know a guy named—” “Yeah, sure — you want his phone number?”

My friend paid my rent for a year while I wrote, because it turned out we couldn’t get a writer. My friends kept on me about, well, if you can’t get a writer, then you write.”
~ Hampton Fancher

“That was the most disappointing thing to me in how this thing was played. Is that I’m on the phone with you now, after all that’s been said, and the fundamental distinction between what James is dealing with in these other cases is not actually brought to the fore. The fundamental difference is that James Franco didn’t seek to use his position to have sex with anyone. There’s not a case of that. He wasn’t using his position or status to try to solicit a sexual favor from anyone. If he had — if that were what the accusation involved — the show would not have gone on. We would have folded up shop and we would have not completed the show. Because then it would have been the same as Harvey Weinstein, or Les Moonves, or any of these cases that are fundamental to this new paradigm. Did you not notice that? Why did you not notice that? Is that not something notable to say, journalistically? Because nobody could find the voice to say it. I’m not just being rhetorical. Why is it that you and the other critics, none of you could find the voice to say, “You know, it’s not this, it’s that”? Because — let me go on and speak further to this. If you go back to the L.A. Times piece, that’s what it lacked. That’s what they were not able to deliver. The one example in the five that involved an issue of a sexual act was between James and a woman he was dating, who he was not working with. There was no professional dynamic in any capacity.

~ David Simon