Unbundling Needn’t Be End of Profitable Revenue For MVPDs

One of the great emotional tug-of-war battles going on in television and video today is around the issue of unbundled vs. bundled content. I believe it is about to hit the pocketbooks of traditional television providers.

Holding one end of the “rope” are MVPDs (multichannel video programming distributors like cable, satellite and telco companies) who package thousands of programming options in bundled offerings at significant cost to subscribers. Consumer demand for pricing relief has resulted over the years in tiered bundle offerings from basic to sports to premium. The full ride can easily cost a subscriber over $100/month.

The other end of the “rope” is held by the media consumer — and as is the case in a real tug-of-war, the youngest demographic groups are anchoring the effort to have more choice and more control over final costs than the older demographics, who grew up with bundled television.

Looking on and ready to join the winning side once it is clear who will win are the traditional content producers like the Hollywood studios, broadcast TV and premium paid cable (e.g., HBO), along with new internet-delivered content providers like Netflix, Amazon, Hulu and Disney’s Maker Studios.

Demographic shifts among media consumers mean demand for less bundled, more “a la carte” choices in T/V (Television/Video) content is getting stronger. And these demographic shifts are more than age preferences. Consider that the majority of Generation X’ers grew up with the control of video games and most Millennials grew up with on-demand access to the World Wide Web. Even Baby Boomers have more than absorbed the instant gratification of media through the many changes in how it is consumed today.

Now something very interesting is happening this year (2015): Pew Research Center says that Millennials will exceed Baby Boomers in population size.

I would say that with these shifts, there will be more and more pressure on MVPDs to unbundle services in order to compete with ad-free OTT (over-the-top) video services like Netflix, Amazon and connected TV like Roku, Apple TV and Chromecast, as well as ad-supported services like Hulu. So how can MVPDs satisfy growing legions of customers demanding on-demand, while minimizing lost revenues?

Invest in consumer research. Ask your customers and prospects what they want and what they would be willing to pay or do for the content they want.

Create more bundle offerings. Design mini-bundles for the specific kinds of programming your subscribers will pay for, and for which you can provide multiple channels. Sports, celebrity, reality, learning, documentaries, international, popular television, and interests might be possible channel genre groupings. Consumers will guide you.

Offer more flexibility. Allow a “design your own bundle” option for a premium. Allow consumers to modify their selections any time they wish.

Offer even more flexibility. Use VOD (video-on-demand) channels for micro-payments to offer content not included in bundles. Consumers may be willing to pay $0.59+ for a program on a network they don’t watch ordinarily and don’t want to pay the full freight for.

Take a page from Pandora and online/mobile video. Do television ad pods that run as much as six minutes and take up one out of every three minutes of airtime ever really get seen? Develop and offer an advertising option that advertisers would pay a high price for: a “pre-roll” to an uninterrupted version of the content. Hulu has tested this online. Television could then sell viewability to advertisers, and compete with online and mobile engagement key performance indicators.

Invest in awareness campaigns. Tell the world about your new options, a friendly “new” source for information and entertainment T/V.

With changes like these, consumers can be declared winners of the tug-of-war, and MVPDs will win as well, with new revenue streams to counter losses in subscriber numbers — and a new consumer appreciation that their broadband providers are also great ways to receive T/V programming.

This article was originally posted on Mediapost.com June 5, 2015.

About John Osborn

John R. Osborn is an ad agency veteran, formerly Senior VP, Group Media Director BBDO/OMD. For 23 years, he led traditional and new media efforts for clients Visa, Bayer, Eli Lilly, DuPont, FedEx, GE, Charles Schwab, Discovery Networks, HBO, Lifetime Networks and more. John is a longtime advocate for and action-taker around emerging media technologies through the emergence of Cable TV (Pillsbury, DuPont - 1980s), Interactive TV and Internet (Visa, US Navy - 1990s) and online, wireless, Wi-Fi access and Advanced Television (Ultramercial - 2000s). In 1994 he won BBDO's agency-wide Founders Award for work reflecting the BBDO ethic of quality, creativity and effort. Most recently he was Director of Business Development at Ultramercial LLC, an emerging media company providing a unique business model for TV, Online, Wireless and Wi-Fi access. - Author of “The Next Business Model for Ad-Supported TV?”, published February 20th, 2009 in Ad Age Mediaworks - Facilitated and trained agency staff and clients in Creative Ideation sessions at BBDO/OMD. - “Integrating Creative Leadership” Certificate from the Creative Problem Solving Institute. - Past President and Interim Executive Director of Creative Education Foundation (CEF). - Grandson of BBDO co-founder, CEF founder, brainstorming and Creative Problem Solving process co-creator Alex Osborn.
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