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Cable TV is on life support, but a new bundle is coming

A strange thing happened in recent weeks, as the media industry threw up its hands over the long-anticipated death of the lucrative cable-TV bundle: Hundreds of thousands of people turned to a different bundle.

Take Christopher Antonacci of Anna Maria, Florida. When the standoff between Disney and cable giant Charter left them deprived of ESPN and several other channels among their approximately 15 million cable subscribers, they took matters into their own hands.

At Charter’s suggestion, Mr. Antonacci, 74, downloaded FuboTV, a streaming service that offers channels including ESPN. Nearly 500,000 people did just that over the past two weeks, according to analytics firm Sensor Tower.

“It has almost everything I need,” said Mr. Antonacci, who signed up for the free trial. “It’s a cable alternative and it seems to be working,” he said.

As cord cutting accelerates across the country, millions of Americans are abandoning their traditional cable-TV packages each year, threatening the demise of the pay-TV bundle that has been the linchpin of the media industry for decades. This became clear when Charter, in its war of words with Disney, announced that parts of the cable bundle were “broken.”

But the settlement between the two companies this week indicated the bundle probably isn’t going anywhere. It’s just adjusting to new viewing habits, with cable companies aiming to sell new packages that include streaming services.

As part of the deal, Disney+, a streaming service that includes many of Disney’s biggest shows and movies, will now be offered to Charter’s TV customers.

“We may view this Disney-charter deal as the opening salvo of a broader re-bundling,” MoffettNathanson, an influential research firm, said in a note Monday.

For more than half a century, the cable-TV bundle was one of the best businesses in media history. TV giants like Disney were paid twice: first by cable distributors, who spent billions every year to make channels like ESPN available to their subscribers, and then by advertisers, who bought the most popular shows as well as products. Open your wallet to promote.

The bundle was also good for cable providers, which steadily added customers: at traditional cable’s peak in 2012, more than 100 million Americans paid for a bundle.

That era is gone. Now, according to analysts’ estimates, about 5 million people abandon cable TV each year – leaving about 75 million Americans in the traditional TV ecosystem.

Most analysts believe that 40 million to 60 million Americans will continue to subscribe to some form of traditional cable in the coming years. However, the sharp decline is changing the situation for media companies and distributors alike.

Already, many cord-cutters are cobbling together their own bundles, subscribing to a mix of services including Netflix, Max, and Hulu. The deal between Disney and Charter has made it clear that cable providers – who often provide broadband Internet service – are eager to put together streaming bundles for them.

William Ruhana, chief executive of Chicken Soup for the Soul Entertainment, which owns several ad-supported streaming services, said Disney’s deal with Charter is proof that the traditional cable business is changing in a big way.

“I think this could be a harbinger of a much bigger change in the industry,” he said.

The winners and losers of the new game are yet to be determined. But in the short term, at least, the new bundling probably won’t be as profitable as the traditional cable business, said Tom Freston, a member of MTV’s founding team and former chief executive of Viacom.

That spells trouble for media industry giants, he said, who are trying to cash in on the cash-rich cable business for as long as possible while they build streaming services to replace them.

Mr Freston said live sports and news programming, which have not yet been fully replicated by streaming services, remain important to pay-TV bundles. National Football League games, an entertainment mainstay for millions of Americans, will remain on traditional television for years due to existing contracts that are a guaranteed lifeline for cable providers.

But streamers are starting to encroach on that territory too. Amazon and YouTube are making inroads among NFL fans by acquiring football rights, and Apple has started showing Major League Baseball and Major League Soccer matches.

“It’s hard to fight the convenience of better technology,” Mr. Freston said. “When sports and news inevitably move to streamers, that will be the end of the game. And what a game it was.”

Still, Mr. Antonacci, who turned to FuboTV during the Charter-Disney face-off, said he was not ready to count out pay TV forever. He has been a cable subscriber for several decades and pays for television and Internet access. He was considering downgrading his cable subscription, keeping a slimmer package with access to his local news stations.

But for now, he’s keeping what he has.

“This situation is making me think about how I use these media providers,” Mr Antonacci said.

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