Ambience at the Disney Bundle celebrates National Broadcast Day at The Row in Los Angeles on May 19, 2022.
Presley Ann | Getty Images Entertainment | Getty Images
This year proved to be another tough year for pay TV, as more people cut the cable cord.
But it hasn't been entirely kind to streaming services either, as platforms have dealt with declining subscriber numbers, declining ad revenue and stubborn losses while Netflix continues to assert its dominance.
However, the era of the cable package is giving way to the era of a new type of package that can give both streamers and cable providers a path forward. Media executives told CNBC this month that 2024 could finally be the year media companies get serious about the package.
“The Charter-Disney deal was a sign of the times,” Macquarie University analyst Tim Nolen said.
Disney and cable giant Charter Communications fought over fees during the lead-up to the NFL season, with Charter CEO Chris Winfrey saying it wasn't a “typical carriage dispute.” Disney-owned channels, including ESPN, have stopped broadcasting to millions of customers of Charter's Spectrum service for about two weeks.
The streaming outage ended in September, hours before “Monday Night Football” began on ESPN, with a deal that gave Spectrum TV Select Plus subscribers access to the ad-supported tier of Disney+, in addition to ESPN+.
Similar arrangements could emerge in 2024, given broad subscriber bases and positive revenue impacts for pay-TV and broadband companies, Nolen added. Liberty Media Chairman and cable TV pioneer John Malone, who also sits on the board of Warner Bros. Discovery, earlier this year further integrated streaming services into cable packages.
Mergers and acquisitions would also lead to further consolidation. Paramount CEO Bob Bakish and Warner Bros. Discovery CEO David Zaslav met last week to discuss a potential merger between the two companies, although the talks are still in the early stages.
Despite the demand for a streaming package, major players have historically been apprehensive about striking such a deal. Businesses will have to navigate calculating average revenue per user, or ARPU, and subscriber growth when offering their services at a discount.
A discounted package could reduce ARPU, but if the number of subscribers increases significantly due to the package, this could offset this loss. Media companies that also include cable networks may worry that a streaming bundle could cannibalize their cable plans.
The major streaming platforms have already made some big moves in 2023. Disney has agreed to buy Comcast's remaining one-third stake in Hulu in a move that has long been expected. Disney also began rolling out its combined platform, Disney+ and Hulu, earlier this month, with a full release coming in March 2024. Disney already offers a triple-bundle of Disney+, ESPN+, and Hulu.
Paramount Global and Apple were reported earlier this month to be considering a bundle of Apple TV+ and Paramount+. Verizon, which offers mobile phone and home internet plans, was also reported to be involved Preparing to deliver a package Ad-supported tiers of Max and Netflix for Verizon customers for $10 per month, $7 less than signing up separately.
The integration of streaming into the pay TV package could be shaping up to provide some much-needed upside to the industry. Advertising revenues have declined significantly for pay TV and are on track to face an 18% decline this year, according to media investment firm GroupM. Streaming platforms' levels of ad-supported advertising, which are often included in packages, result in higher average revenue per user (ARPU) for cable companies due to the ad revenue generated, Nolen said.
Like pay TV providers, streaming platforms have had to grapple with subscriber losses over the past year, albeit at a slower pace. For example, streaming leader Netflix has focused on raising the price of its plans while also introducing ad-supported tiers to offset subscriber losses.
Zaslav last month warned of “generational disruption” and pointed to the company's Max streaming service, which he at one point said was “losing billions of dollars.” However, Warner Bros. Discovery so, Making a profit in its broadcasting sectorThis is according to the company's latest quarterly earnings report.
Disney charter deal I offered a framework for cable companies To move their business models into the streaming era and stabilize subscriber funnels, according to Ampere Analysis.
“The charter should protect the subscriber base and hopefully increase rates,” Nolen said. “Disney and Warner Bros. Discovery have the most upside” from the bundling trend “due to the breadth of content in their portfolio of services and the fact that they are already starting to bundle those services together.”
Disney and Warner Bros. did not respond. Discovery, Paramount, Netflix and Apple immediately requested CNBC for comment.
– CNBC Alex Sherman She contributed to this report.
Don't miss these stories from CNBC PRO:
“Infuriatingly humble alcohol fanatic. Unapologetic beer practitioner. Analyst.”