What should be included in a cable package in 2016? This may seem like an odd question to ask, considering how little cable TV seems to have changed in the past few decades. Any customer who turns on a TV set and starts channel surfing will encounter a grid of current and upcoming programming that would be familiar to anyone from the 1990s.

But make no mistake, change is afoot even if it is not readily apparent from the outside. Under increasingly intense competition from over-the-top content providers such as Amazon, Netflix and others, the cable industry has been rethinking its bundles. Let’s look at a few ways in which pay-TV packages are currently evolving.

The rise of the “slim (or skinny) bundle”

Verizon, which offers pay TV through its FiOS service, made waves in early 2015 when it introduced a $55 per month “Custom TV” package. It cut monthly costs by excluding some of the pricier channels, such as ESPN and Fox Sports 1, by default. This bold move prompted some content providers to sue cable company partners over alleged violations of contracts.

Certainly, a lot is at stake in these new bundles:

  • Traditional cable TV business models have relied in large part on the subsidization of basic channels by high-ticket live sports ones like ESPN et al.
  • According to SNL Kagan, ESPN fees were approximately $6.61 a month as of April 2015, making it easily the most expensive cable channel.
  • ESPN and Disney Channel combined account for more than $10 billion a year in revenue for Disney.

Earlier figures from the same firm revealed that the sports-centric NFL Network, Fox Sports 1 and ESPN2 were all in the top 10, well above the median cost of a cable channel (which back in 2014 was still a mere 14 cents). However, for many operators there hasn’t been enough incentive to ditch these popular channels until recently, when the surging costs of cable as well as the growing availability of alternatives finally converged.

Sports account for a huge portion of cable programming costs.

Sports account for a huge portion of cable programming costs.

Cable bills have been on the rise for a while. The price of expanded basic cable more than doubled between 1995 and 2014, leading 56 percent of respondents in a BTIG Research poll to say that they would be willing to drop ESPN and ESPN2 in order to save $8 on their monthly bills.

The slim/skinny bundle is a play for these cost-conscious customers. Its impact so far is unknown, though. While ESPN has attributed subscriber churn to its exclusion from slim bundles, Comcast has downplayed the trend, pointing to faster growth in high-end video packages.

Mobile and on-demand content

Cable companies and content providers alike have pushed beyond their traditional boundaries to capture a new generation of customers. For cable operators, this shift has meant embracing the transition to eventual all-IP distribution, rolling out hybrid set-top boxes and offering Video on Demand packages in addition to linear TV.

“Short form video is another key space to watch.”

These moves help cable companies cater to subscribers who watch video on IP-enabled phones and tablets in addition to (or even instead of) their TV sets. It also helps close the gap with OTT providers, thanks to the flexibility of VOD platforms.

Another space to watch in the years ahead is short form video for mobile devices, which content providers like ESPN have delved into in order to diversify their offerings. Business Insider reported that ESPN has focused heavily on Facebook and Snapchat as new platforms for its content. Cable companies may need to keep this trend in mind, especially in the context of renewed emphasis on slim bundles that could incentivize content providers to reimagine their current programming.

Overall, expect multiple shifts in terms of bundle pricing and scope, as well as complementary VOD offerings, in the coming years. Solutions such as hybrid STBs and eVUE-TV VOD from Evolution Digital can help cable operators bridge the gap between traditional programming and the technologies and consumption habits of the future.

Other News
Other News
Video on Demand has made inroads at awards shows like…