Streaming Execs Foresee Rebundling, Consolidation as Industry’s Future
As the old Peter Allen song goes, “Everything old is new again,” and that certainly applies to the current state of the television industry. With a merger between new streaming corporate siblings HBO Max and discovery+ in the works, and one potentially coming for Disney platforms Hulu and Disney+, the streaming world is now moving into its rebundling and consolidation phase with nearly every content owner attempting to reassemble its streaming content and platforms under its own individual corporate umbrella.
At the same time, practically every player in the industry is embracing advertising; Netflix is hoping to roll out its ad-supported tier this year and Disney+ has begun releasing details about its commercial-enhanced version.
If you didn’t know any better, you could mistake these recent industry shake-ups for a strategic return to the days of the cable bundle, and if you did, you wouldn’t be alone as the president and CEO of educational streamer CuriosityStream Clint Stinchcomb tends to agree with you.
“I think Warner Bros. Discovery will seek to reconstitute the cable bundle — news from CNN, sports from TNT, TBS and other places, scripted series with HBO and nonfiction from the legacy Discovery brands,” he said on a call with investors last week. “I think Disney and Paramount, with their assets, will essentially try to do the same.”
When content companies partner with cable and satellite providers to broadcast their networks, it is almost never on an a la carte, channel-by-channel basis. Instead, the broadcast rights to all of the channels owned by an individual company are bundled together in order to make the offerings more attractive to cablers so that they will be willing to pay more for the retransmission fees.
Something similar is currently happening in the world of streaming. In the most apples-to-apples comparison, there is the literal Disney Bundle that allows customers to subscribe to Disney+, Hulu, and ESPN+ for a discounted rate and SHOWTIME’s streaming service is now being bundled with Paramount+.
Whether or not these bundles eventually lead to outright service mergers or not doesn’t really matter, because, for all intents and purposes, they are the same thing, just with separate interfaces for each service. The majority of the bundling happening across the streaming space involves bringing content and services together to encourage more people to subscribe. However, when it comes to the migration of content, perhaps no service has been hit harder by this than Disney’s longest-tenured streamer, Hulu.
So far this year, it has been announced that the streamer would be losing the next-day streaming rights for all of NBCUniversal's shows as they move home to Peacock and after six and a half years, the platform’s deal with EPIX ended in March meaning that over 2,500 movies from Paramount and MGM will be heading to their parent companies’ streamers Paramount+ and Prime Video respectively.
Not only do these additions bulk up Peacock, Paramount+, and Prime Video, but they also could hasten the consolidation of Disney’s streamers. NBCU’s parent company Comcast still owns one-third of Hulu, so that would likely need to be worked out before any streaming merger officially happened between the Disney platforms, but again, there doesn’t need to be a complete integration for this rebundling to work.
For the majority of Disney+ subscribers, Hulu programing is already incorporated in the platform. Outside of the United States, much of what we know as Hulu content falls under the Star, Star+, and Hotstar hubs inside Disney+.
“I think this overall dynamic is going to create consolidation,” Stinchcomb said. “Which, in my view, is going to result in maybe eight large video streaming services that offer the key genres of content.”
While it makes sense that the CEO of a fringe streamer like CuriosityStream foresees a future in which eight services dominate the landscape, one of the most experienced streaming execs sees a future in which far fewer platforms remain.
After his company was officially acquired by Discovery, former Warner Media CEO Jason Kilar went on a media tour extolling the lessons that he learned having launched Hulu, HBO Max, and the ill-fated CNN+.
“My hunch is there’s probably going to be three must-have general entertainment streaming services. And on this, I’m referring to the storytelling-centric companies,” Kilar told Vulture last month. “So WarnerMedia is clearly one with HBO Max, and then I put Disney and Netflix in that camp as well. I’m setting aside Apple and Amazon because they’re kind of different things — one supports a hardware strategy, the other supports a retail strategy.”
The exec believes that consolidation is already happening and that the next three to four years will reshape the entire industry. Kilar suspects that the biggest streaming services, with a wide variety of content for differing audiences, will be the ones to succeed.
“I just think that we’re about to see, in the next 36 to 48 months, a fair bit of changes to the chessboard,” he said.
However, for many of the same reasons that Kilar excluded Apple and Amazon, Stinchcomb believes that moving forward streamers will offer more than just the video bundles that we know now. Amazon already includes Prime Video as part of an annual Amazon Prime subscription, and as Apple makes bigger inroads into streaming, their variety of services could be packaged together to offer a full-service suite of streaming options for consumers.
“Apple has broader bundling optionality,” Stinchcomb said. “I think they have over 800 million total subscribers when you consider all of their products and they can incorporate games, music, audio.”
While not its own standalone service, Netflix has also recently been investing in games as a way to diversify and capitalize on its content offerings. Additionally, Disney is now providing discounts to their parks for Disney+ subscribers and Peacock is giving away movie tickets to loyal subscribers.
So as competition heats up, who knows how creative these conglomerates could get in efforts to incentivize streaming? However, no matter what they do, whether or not they can keep their customers will likely come down to whether or not consumers think that the value provided by the content is worth the price of a subscription.
The major reason that most customers began embracing cord-cutting in the first place was because of the rising costs of cable and satellite bills, thanks in no small part by the rising retrans fees required to secure the channels and networks that viewers most wanted to watch. Now as streamers are raising subscription prices in order to keep up with their increasing content spends, executives are having to wrestle with how to avoid the same fate as their traditional TV brethren.
Thanks to what is either the peak of irony or hindsight being 20/20, the new normal appears to be something akin to old way of doing business.