Tech: Viacom's sports-free, entertainment-only skinny bundle (VIAB)

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Negotiations between Viacom and at least one multichannel video programming distributor (MVPD) to create a low-cost, entertainment-only TV bundle are at an advanced stage, Variety reports.

Viacom sees a transformational opportunity. The company hopes that a package of high-quality entertainment at a low cost will attract consumers — particularly cord-never millennials — into the pay-TV ecosystem, and keep others from leaving. This proposition would be especially appealing to consumers who don’t care much for sports.

Here are some key details of the plan:

• Viacom will undercut other skinny bundles. Viacom’s prospective entertainment-only skinny bundle would cost around $10-$20, compared to the roughly $40 price point of other over-the-top (OTT) skinny bundle offerings that have hit the market recently, such as DirecTV Now, Hulu Live TV, YouTube TV, and others.
• It would also give consumers more flexibility. Viacom CEO Bob Bakish wants people to be able to trade up and down from low-cost bundles — like offering a-la-carte sub-bundles within a broader TV package, essentially. This could save consumers money, but it’s also a way for Viacom to prolong the great unbundling of pay-TV.
• Viacom wants to shore up traditional pay TV… During the company’s February earnings call, Bakish said he wanted to “reinforce the value of the pay TV ecosystem.” Reading between the lines, this means Viacom will offer its new content only to incumbent pay TV providers, and withhold this content from newer entrants in the space.
• … And stem the rise of digital-first TV services. Viacom is only supplying digital MVPDs like Amazon, Netflix, and Hulu, with its older content catalogs. Currently, Viacom’s networks are not available on YouTube TV or Hulu Live TV, and it also pulled its content from PlayStation Vue in November 2016.

Doubts abound over the business model for digital TV. Bakish has also called into question the viability of the $40 skinny bundles that include sports and broadcast signal because the margins on them are so slim. According to Bakish, one distributor said it costs $46 to produce these digital TV offerings — which doesn't seem a sustainable cost structure. Based on this remark, it's possible that prices on $40 skinny bundles, with sports, could rise.

Over the last few years, there’s been much talk about the “death of TV.” However, television is not dying so much as it's evolving: extending beyond the traditional television screen and broadening to include programming from new sources accessed in new ways.

It's strikingly evident that more consumers are shifting their media time away from live TV, while opting for services that allow them to watch what they want, when they want. Indeed, we are seeing a migration toward original digital video such as YouTube Originals, SVOD services such as Netflix, and live streaming on social platforms.

However, not all is lost for legacy media companies. Amid this rapidly shifting TV landscape, traditional media companies are making moves across a number of different fronts — trying out new distribution channels, creating new types of programming aimed at a mobile-first audience, and partnering with innovate digital media companies. In addition, cable providers have begun offering alternatives for consumers who may no longer be willing to pay for a full TV package.

Dylan Mortensen, senior research analyst for BI Intelligence, has compiled a detailed report on the future of TV that looks at how TV viewer, subscriber, and advertising trends are shifting, and where and what audiences are watching as they turn away from traditional TV.

Here are some key points from the report:

• Increased competition from digital services like Netflix and Hulu as well as new hardware to access content are shifting consumers' attention away from live TV programming.
• Across the board, the numbers for live TV are bad. US adults are watching traditional TV on average 18 minutes fewer per day versus two years ago, a drop of 6%. In keeping with this, cable subscriptions are down, and TV ad revenue is stagnant.
• People are consuming more media content than ever before, but how they're doing so is changing. Half of US TV households now subscribe to SVOD services, like Netflix, Amazon, and Hulu, and viewing of original digital video content is on the rise.
• Legacy TV companies are recognizing these shifts and beginning to pivot their business models to keep pace with the changes. They are launching branded apps and sites to move their programming beyond the TV glass, distributing on social platforms to reach massive, young audiences, and forming partnerships with digital media brands to create new content.
• The TV ad industry is also taking a cue from digital. Programmatic TV ad buying represented just 4% (or $2.5 billion) of US TV ad budgets in 2015 but is expected to grow to 17% ($10 billion) by 2019. Meanwhile, networks are also developing branded TV content, similar to publishers' push into sponsored content.

In full, the report:

• Outlines the shift in consumer viewing habits, specifically the younger generation.
• Explores the rise of subscription streaming services and the importance of original digital video content.
• Breaks down ways in which legacy media companies are shifting their content and advertising strategies.
• And Discusses new technology that will more effectively measure audiences across screens and platforms.

Interested in getting the full report? Here are two ways to access it:

1. Subscribe to an All-Access pass to BI Intelligence and gain immediate access to this report and over 100 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. » START A MEMBERSHIP
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