Here’s a Monday morning brain teaser to consider: is there any rhyme or reason for which TV networks are being included in skinny bundles like Sling TV, DirecTV Now, YouTube TV and soon Hulu? If there is, it’s hard to discern what it is. In fact, the composition of skinny bundles is getting more puzzling all the time.
For instance, last Friday, Hulu announced that it had reached a distribution deal with A+E Networks for its forthcoming skinny bundle. The deal followed previously announced ones with Hulu’s corporate parents Fox, Disney and Turner, plus CBS. But just a couple weeks ago, when YouTube TV was announced, it didn’t include A+E Networks (nor Turner, Viacom, Discovery, AMC or Scripps), though it did include CBS, Disney, Fox and NBCU.
So Hulu and YouTube TV both have CBS, but neither DirecTV Now nor Sling TV have it. (And by the way, having a broadcast network really just means having it in the geographies where the network owns and operates the local affiliate, since we’ve yet to hear about any deals between skinny bundles and local station owners.)
Where other networks fall is equally confusing. Discovery is only on DirecTV Now. Viacom’s networks are on DirecTV Now too and on Sling TV (with some like MTV on an add-on tier) as are AMC and Scripps, though none are on YouTube TV or Hulu (which to be fair hasn’t even launched yet, so other deals may be still coming). Then there are the regional sports networks, which Sling TV seems to be in the lead on carrying, though my home town NESN isn’t yet available.
It’s also important to note that both DirecTV Now and Sling TV offer different packaging models (Sling TV’s is a hybrid of 2 different base packages with multiple add-on tiers while DirecTV offers 4 different multichannel levels).
The various decisions about which networks are included pretty much boils down to the simple tradeoff every skinny bundle is forced to make: in order to keep their retail price points low enough to differentiate from pay-TV’s multichannel bundles, only a certain number of TV networks can be carried if the skinny bundle hopes to attain profitability.
Of course then the question is HOW are these skinny bundles making their programming decisions? All networks have signaled at this point they’re very open to making deals with skinny bundles, though as always the specific terms are where the rubber meets the road.
My sense is the skinny bundles’ decision-making is being guided by “3 P’s” - price, packaging and popularity of the TV networks. A network’s price is obviously most important, both in absolute terms and also relative to other networks’ prices. Packaging is also critical - must lower-rated networks be carried in order to get to the flagships? And how much flexibility is there to tier various networks? Then of course there’s popularity - which networks are most watched and sought by viewers? At a high level the broadcast networks, with their still relatively high ratings, are critical. But loyalty runs deep for certain groups too; for example, appealing to millennial men without top tier sports networks is an uphill battle.
I’ve described the dilemma skinny bundles face in the past as resulting in “Swiss cheese” lineups that have major holes in them that weaken their services’ appeal. For now YouTube TV seems to have the most holes, while DirecTV Now and Sling TV (and PlayStation Vue, which really isn't a skinny bundle per se), have the fewest - but only if the highest tier or most add-on packages are taken, which in turn diminishes any material cost savings the subscriber was attracted by.
With so many variables in play, I find myself wondering how analytical the skinny bundles are being in their decision-making about the 3 P’s. For example, I’ve cited research done by Altman Vilandrie & Company numerous times, that does a really good job of identifying which networks are most valued and which bundles would have the most appeal. Have the skinny bundle providers done similar research and modeling? If they have and assuming the results are relatively consistent, then why is each skinny bundle so different from the others? And if they haven’t done the research, how ARE they making programming decisions?
As I’ve said many times before, I’m convinced there’s a narrow segment of TV viewers who will be attracted to skinny bundles. But the category is fast becoming confusing, with different providers packaging different networks in vastly different ways. As always, consumers crave simplicity. As we’re seeing from the variety of network deals being announced, consumers will have to do a fair amount of work to figure out if any skinny bundle is right for them. And skinny bundles will continue to be challenged by budget constraints to competitively configure compelling skinny bundles.
Categories: Skinny Bundles