Giving the People What They Want

Originally published at tdgresearch.com on November 25, 2015

The past few months have seen the launch of several new broadband-only pay-TV offerings from various MVPDs. These services are aimed at Gen Z and Millennial viewers, ‘Cord Nevers,’ who do not want or need a full pay-TV package. Dish was first out of the gate with Sling, a $20/month service that featured ESPN and CNN. It has recently been followed by Verizon, with a Go90 service that launched last month, Comcast, which debuted a Stream service in November and Cox, which is set to launch the new FlareMe TV by the end of the year.

Are these services the right way for MVPDs to lure millennials back to pay-TV or is that demographic already a lost cause?

We think these services will prove to be successful, as they leverage the MVPDs position as broadband providers, while keeping millennial viewers in the ecosystem.

The MVPDs Control Access to the Internet

When tech bloggers talk about the death of the television industry, they conveniently overlook one important fact: for most people, the company from which they get pay-TV is the same company that gives them their broadband connection. That’s a huge competitive advantage, especially when you consider that most high-speed broadband providers are monopolies or duopolies, and thus the consumer has very little choice.

That’s why we’ve long said that the pay-TV customer is the MVPD’s to lose. They have them on the hook for broadband, and so upselling pay-TV should be fairly simple, particularly because pay-TV is a loss-leader for MVPDs who actually make the majority of their money off of broadband. Upselling will happen as twenty-somethings become thirty-somethings, settle down, have kids and realize that a traditional bundle is actually a better deal than the haphazard collection of network apps they’ve cobbled together to suit everyone in the family.

The Right Content

We’ve also been impressed with how the new broadband-only systems seem to be incorporating both short-form and long-form content in the same package. That’s how people watch TV today–snacking and bingeing (to use two food-related terms) and a system that offers viewers those options within a single interface is going to prove to be quite popular.

The challenge is to make sure that what’s offered is the right mix of short and long form, from the right providers. The early TV Everywhere packages the MVPDs offered were short on any networks viewers might have wanted to watch on a regular basis; hence their lack of success. With these new broadband-only systems, it’s imperative that they strike deals with the more popular MCNs and with TV networks a mass (versus niche) audience will want to pay to see.

Once these skinny bundles are in place, it’s easy to see how the MVPDs can begin to upsell their new customers, one app at a time. Maybe it’s HBO Now, maybe it’s Netflix or Hulu (which, as we mentioned the other week, are beginning to strike deals with MVPDs so that they can sell subscriptions too.)

What Comes Next

What will be interesting to watch is how these new offerings evolve, if any of the MVPDs will try selling them in markets where they currently have no presence (thus launching a war with the incumbent) and what type of content mix proves to be the most popular.