Currently, he estimates that Sling TV, DIRECTV NOW, and PlayStation Vue control nearly 75% of the market. Sling has 2.21 million subscribers, DIRECTV NOW with 1.2 million, and PlayStation Vue with 400,000.
While the main reason is rising costs of the cable bundle, many subscribers want to customize channels to their preferences. In fact, when asked what type of plan people wanted, the data shows that 66% want to build their own bundle.
Espelien shared that 68% of customers surveyed don’t want to pay for channels they don’t watch and 48% said that a select few networks are important.
The biggest challenge for these companies is that they are losing money. He shared that the fundamental economics of the $40 bundle is bad. The streaming services’ margins are taking the burden of the lower costs. Content providers aren’t discounting rates, so the burden shifts to distributors.
The winners of this shift is likely to be the broadband providers. Consumers need high speed internet to consume these services and can pair cord cutting services with their internet plans.
He posed the question “are skinny bundles the right answer?” While younger demographic is shifting to non-live content, Espelien equated the skinny bundle to making a smaller hamburger when everyone is becoming a vegetarian.
The data shows that “Cord Nevers” (those who never subscribed to cable) aren’t signing up for these services. Only 9% of these consumers are signing up for live TV streaming services.
Espelien felt that services that offer on-demand original content like Netflix and HBO fit this demographic better. At $10/month those services look like incredible value—relative to a $40 skinny bundle.
The data shows that there is a market though for live TV streaming services to capture cord cutters. 54% of live streaming service subscribers are cord cutters, while 37% also subscribe to a legacy service.
So the biggest question becomes: how can this be a win for everyone? Consumers want low cost and content choice. Streaming services want to profitably grow subscribers. And content producers want to continue to earn the fees they’re used to.
What is clear is that consumers aren’t going back to paying $100 for content bundles. The burden then becomes a power struggle between content producers and content distributors. Who will win? Only time will tell.