Netflix Inc. broke the cable-TV bundle. Now it’s time to put it back together again, and cable giants like Comcast Corp. look eager to help.
It’s true that streaming has created more choices for consumers. You don’t necessarily need to subscribe to a $100-a-month cable package just to access kid-friendly Disney programs or re-runs of “The Big Bang Theory” (or pay extra for the ability to DVR the episodes you’ll miss). There are on-demand apps for both of those now — Disney+, which launched on Tuesday, and HBO Max, which becomes available in May.
At the same time, one major consequence of the streaming wars is that they’ve caused a new kind of consumer frustration. It feels like everything is becoming segregated across various services with their own individual paywalls. That requires knowing which TV programs and movies reside where, having to toggle among those different apps — which isn’t as smooth as simply channel-surfing — and managing multiple monthly subscriptions. Sign up for enough of them, and it can easily add up to the cost of good old cable, especially given that a strong internet connection is a necessary component.
It’s a situation that’s unsustainable, and already the media and cable giants seem to be eyeing the reintroduction of bundles to make things easier on consumers (and to make their subscriptions stickier).
As Comcast’s Matthew Strauss put it, 'The great un-bundling could give birth to the great re-bundling.” He should know. Strauss is the former executive vice president of Comcast's Xfinity Services; he was recently put in charge of Peacock, the company’s own streaming product set to launch in April with content provided by its NBCUniversal sports and entertainment division. It will join Netflix, Disney+, Apple TV+, Amazon Prime Video, HBO Max and many more in the new streaming marketplace.
'How could someone possibly navigate all these apps? That's not how you watch TV,” Strauss said in a phone interview in September. “My prediction is that we're going to come full circle.'
Strauss and I were on the topic because Comcast had just made something called Xfinity Flex free to customers who subscribe to the company’s internet services but not its cable-TV packages. Flex is essentially a dashboard where users can access streaming subscriptions. It’s a lot like the home screen shown when powering up a Roku, Apple TV or Amazon Fire TV Stick — a display of tiles teasing different programs or services. The Xfinity X1 cable service is still front and center for Comcast, but Flex is a sign that the company is at least exploring how to cater to what may some day be a mostly internet-only customer base. While it may not be a bundle, it’s not hard to make the leap and envision a day when Comcast tries to offer bundles of streaming apps to its internet subscribers, serving as the go-between for programmers and customers just like it does in the cable world.
Walt Disney Co. is already providing some evidence that it’s thinking the same way. As I noted in my column Tuesday, the entertainment giant recognizes that many viewers want more than a single app dedicated to superhero flicks and G-rated content. That’s why, alongside the launch of Disney+, it also began offering a $13-a-month bundle that tacks on Hulu and ESPN+. While Apple Inc.’s own original works such as “The Morning Show” can be watched with an Apple TV+ subscription, the company also has separately taken to aggregating rival apps in Apple TV Channels, where users can sign up on an a-la-carte basis. Similarly, Amazon.com Inc. has Prime Video and Amazon Channels. These aggregation efforts could all be precursors to bundling.
Charter Communications Inc. CEO Tom Rutledge, during a September investor conference, discussed the challenges for so-called direct-to-consumer businesses — such as Disney+, CBS All Access, and so on — that traditionally haven’t had to deal directly with subscribers because the cable giants had typically maintained those relationships. Suddenly, programmers are having to handle billing and service issues and come up with customer-retention strategies. (Disney got a taste of this Tuesday, when its brand-new app was hit by technological glitches.) “All of those activities we do on behalf of traditional pay-TV vendors,” Rutledge said. It’s very hard to get “economies of scale in the direct-to-consumer marketplace like we’ve gotten out of the historic business.” That certainly sounds like someone who’s ready to negotiate some new distribution partnerships.
Direct-to-consumer is industry jargon referring to how a streaming app bypasses the traditional distributors — flying directly past Charter and Comcast to the end user. So wouldn’t it be something if the winners of the streaming wars turned out to be none other than the cable companies? At the very least, remnants of their bundling model are sure to live on in streaming.
Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.
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