Thursday, October 16, 2014, 3:22 PM ET|Posted by Will Richmond
Between HBO's OTT announcement yesterday and CBS's this morning, there're intensifying buzz that the demise of pay-TV, with its expensive multichannel bundles, may finally be upon us. But here's a contrarian thought: what if all of the SVOD activity we're already seeing - plus more that's sure to come - is actually very good news for pay-TV? Before you scoff at me as a head-in-the-sand pay-TV defender, stop and consider the following.
While it's true that for most pay-TV subscribers the multichannel bundle is loaded with a lot of stuff they don't watch/value and that they would love to pay less, there's still tremendous value in the proposition that all/most major networks are available, via one remote control (albeit clunky for some), one UI (albeit Soviet vintage for many) and one bill (albeit confusing for all).
With pay-TV, there are no complicated decisions to make about which SVOD service has which channels/programs/episodes. It's all there and if you're in the 50% of homes that now have a DVR, it's all there on-demand, and ad-free if you want to skip. Also, no decisions about which connected TV device has integrated which SVOD service, what the quality is, or the need to switch inputs. And importantly, one number to call if there's a problem (granted, you may wait a while for it to be answered).
Pay-TV's simplicity value proposition is even more potent given the multitude of SVOD services available. In the not so old days, it was just a decision to subscribe to Netflix or not. Now there's Hulu Plus, Amazon, HBO OTT (soon), CBS All Access, various sports leagues' services, WWE and undoubtedly many more to come. Read "The Paradox of Choice" if you're not familiar with what happens when people are presented with too many options.
Meanwhile, cobbling together a variety of SVOD services won't be cheap, thereby eroding the cost savings impetus that will drive most would-be cord-cutters in the first place. It's not hard to see how a few SVOD services, plus an expensive broadband tier to handle all the streaming, will cost about the same or more than what a triple-play bundle from a pay-TV operator would run.
If all that wasn't enough, the final consideration is that pay-TV services are getting a lot better. Features like on-demand, TV Everywhere, improved DVRs, next-gen set-tops that can handle apps (perhaps opening an SVOD bundling opportunity?) are spreading. Many (but not all!) pay-TV operators are dramatically, though belatedly, enhancing their user experiences, delivering many of the sought-after features SVOD providers have been touting themselves.
Add it all up and the upcoming, confusing landscape of SVOD offers a potentially fertile opportunity for pay-TV operators' marketing messages. One can easily imagine a TV ad with a guy, beer in hand, being assaulted by SVOD offers, and then having an angelic voiceover suggest he simplify life with a deeply discounted pay-TV package. A broad smile then breaks out on his face.
Of course, the voiceover won't mention he'll need to take out a second mortgage in order to afford pay-TV's monthly fees!