Why skinny bundles are missing the point

When we started Odd Networks two years ago I remember many people telling me we were crazy for two reasons. The first reason was that there were only a few players in the space, and the second was that even there was an explosion of OTT applications consolidation would come well before we were able to make a business out of what we do.

As a reminder, we are a platform that makes it easy for those that have video content to distribute it throughout the OTT platforms like Roku, Apple TV, Amazon Fire, Xbox, and all of the smart phones and tablets. At this point I would say that both of the reasons for why we should just give up before we even started were wrong. Currently, the OTT space is growing. Roku has over 4,000 apps and each of the platforms is working to increase the number of apps and types of content. The typical solutions are already there or close to having established networks they currently include, ESPN, Netflix, Hulu, and even remnants of the past like CBS.

A new trend is emerging that shows the existing cable networks are attempting to appeal to a new audience that won’t pay an expensive cable bill and has claimed to only want a “limited” number of channels. The reason and math is simple; a cable bill far exceeds $150 on average these days and much of that is to pay for channels that the average viewer will never spend much time watching. It reminds me of the post office and how it exists in a sense to subsidize the few that use it (I’ll leave politics out of this though).

SlingTV was one of the first to start with a few products. Dish Network saw that there was a new audience of millions of viewers that were now consuming their content through things outside of cable or satellite. They already owned the rights of many stations and chose to create a “skinny bundle”. The idea is simple; they provide a limited number of shows that are “likely to be viewed”. In exchange for only a limited number of channels the package was priced at $19.99 a month. This is kind of a false number though (go figure), but that only allows one person to be watching at a time. So it doesn’t truly “replace” cable in that situation. To get the multi user level, it doubles in price to $39.99.

While SlingTV provided me the ability to watch a few shows and NBA games (TNT, Turner) it still seemed like 90% of the channels that I was paying for, I would never watch but I was still being charged for them. On top of that they quickly started offering upgrades such as sports packages or HBO. If I were to add a sports package that included ESPN or add HBO, the package was suddenly $60 a month and again while I was getting more shows that I watched, I was still paying for channels I would never watch.

Since the first few skinny bundles launched more have been launched, including Playstation Vue, DirecTV Now, and YouTube TV.

I think there are a few flaws that this system has that will make it work in limited numbers but never really capture the cord cutters and cord nevers that they are so desperate to pick up.

Still the same “concept”

While these new product offerings are in a sense appealing to those that wish to stream their content they still have many of the same flaws that are present in the current system. They still make me pay for channels I do not want to watch and can become very expensive very quickly. What these companies have ended up doing is offering a cheaper alternative to their current cable base and I bet in time they realize they cannibalize their existing customers with a cheaper option hurting their bottom line.

In a sense they are targeting the cable cutters which make up a smaller percentage than cable nevers. As cable loses 1–2% of their users every year if they re-acquire them using these skinny bundles they in a sense are losing money to combat churn. In addition to that more players are entering the space like Sony, Youtube, and probably Apple at some point. Meaning this small group of people is now being divided into a larger number of options.

An A La Carte solution

I have touched upon the different viewing habits of viewers and you can read about that here if you would like (http://bit.ly/2sU8hcx).

The real solution and something I think many would pay for is an a la carte approach. This would allow the end user to pick and choose exactly what content they want to watch or what channels they want to pay for on a 1:1 basis.

This means that if I only wanted ESPN, I wouldn’t be required to pay for ESPN 3–25 (or however many of them there are these days). At the same time I could buy the Discovery channel as a stand alone app and not have to pay for 50 other channels that I would never watch.

So let’s do some simple math and think about this.

I will use the average cable bill in America as represented by 2016. Also factor in basic cost like the cable boxes, taxes and fees (using a flat 25%). I will not include internet price as I am assuming both will have to pay for that no matter what. I will avoid adding any other packages such as HBO or Showtime, but recognize that they can typically fall anywhere between $7.99 and $14.99 in additional cost.

For the cord cutter I will use some of the more popular options such as Netflix, Hulu, Sling TV (just cause), and HBO. The cost of cable isn’t shown in this one as well and can vary greatly by neighborhood.

The savings looks pretty good. And I know that the typical response I will get to this is that deals can lower the bill and many people may not have 3 cable boxes and instead have just one. On top of that people can “bundle” their package and get a cheaper deal. That may be true, but that also will once again make you pay for things you may or may not want. I am trying to look at this based on just basic research on the average cost and the most used OTT offerings. I am looking at a 46% savings which when thinking about it is pretty impressive. Overall, I would save myself a little over $801 a year.

Now let’s look at this same breakdown. This time I will take out sling tv and insert some numbers on what a few channels I would want and potentially what they could cost. I will use CBS as my baseline.

Now you can see the true savings and the real potential of the a la carte options. I only wanted a few of the channels and in fact only a couple of those are covered in the sling options. But by simply choosing what I want I kept my savings of $801 and added another $192 a year.

So the question is do those other channels that I will never watch equal $192? That’s for you to decide, but for me the answer is quite clear.

Outside of just the savings these bundles are missing the point of why people are cutting the cord or choosing to never have cable. The future audience wants to pick and choose what they watch as opposed to buying it all and paying for content they never intend to watch.

If you want to see more of what we are up go to https://oddnetworks.com/

Or if you want to hear our story — An Odd Platform — The Story of Odd Networks

https://blog.oddnetworks.com/an-odd-platform-the-story-of-odd-networks-abaf3b8669ef