Too Much TV: Your TV Talking Points For Wednesday, May 8th, 2024

No, we are not entering the "great rebundling"

Here's everything you need to know about the world of television for Wednesday, May 8th, 2024:

HERE ARE ALL THE THINGS THE NEW DISNEY+, HULU & MAX BUNDLE IS NOT
Disney and Warner Bros. Discovery caught industry observers by surprise today when they announced that beginning this summer, subscribers will be able to buy a new streaming bundle that includes Disney+, Hulu, and Max. And that, ladies and gentlemen, is just about all we know about the idea.

It appears that this is not an effort to combine the apps, each one will remain a standalone app, but subscribing to the bundle would involve some overall discounted price.

But even the simplest details of the bundle are confusing at this point. One of the big issues with any of these ideas is deciding who handles the billing. In a competitive streaming environment, retaining the billing and contact information for subscribers is key. That direct connection with customers allows media companies to pitch other products and build an overall relationship with subscribers.

The brief press release states customers can sign up for an ad-supported or ad-free plan at any of the three streaming platform’s websites. This would make sense because in that case each platform would retain its customer relationship, but kick back a percentage of the bundle subscription to the other services. 

But CNBC's Lillian Rizzo and Alex Sherman are reporting a slightly different scenario, which if true is a terrible deal for Max:

Disney will essentially act as the distributor in this case, collecting subscription fees from subscribers and paying out Warner Bros. Discovery a percentage.

I know that Warner Bros. Discovery is in fairly desperate straits right now and the Disney-owned Disney+ and Hulu make up 2/3 of this proposed bundle. But if WBD is giving up its direct relationship with customers to make this work, they are more desperate than I realized. 

Here are some other thoughts about this:

* You are going to hear TV critics and pundits throwing around the phrase "Great Rebundling" a lot over the next few days. That is not what this is. 

Certain often-used streaming industry narratives make me absolutely insane and at the top of the list is the claim that we are entering the time of the "great re-bundling." The theory is that in the dinosaur days of the 1990s and early aughts, media companies made wheelbarrows full of money by combining cable channels together and selling them as a very profitable (and expensive) bundle. 

And like clockwork, every time a streamer raises its price or cuts a distribution partnership, a flurry of think pieces get posted arguing that "hey, all of this streaming stuff is going to cost as much as a cable package" and "all of these different streaming services are starting to feel like a new bundle."

But once again, that's nothing like a cable bundle. If it was, subscribers would have to subscribe to every major streaming service in one package and wouldn't be able to drop any individual streamers. Which is the complete opposite of the reality of the streaming business.

Shared billing is not "reinventing the cable bundle." Customers can still purchase the services separately, much as they can buy only the products they want in a grocery store. And no one walks out of a grocery store with a bag of food and proclaims "I'm re-bundling dinner!"

* If you want to know why this announcement came today, keep in mind that the Warner Bros. Discovery Q1 2024 earnings release is due Thursday before the market opens. It's also why company executives were talking to reporters on background today, preparing investors for the prospects of deeper cuts in order for the company to hit its executive stock option...I mean....revenue goals.

* You're going to read about this deal being done in part because it will presumably help with the churn rate at these streamers. And it will no doubt have an impact, although not as much as I suspect some people might expect. The churn rate (the percentage of subscribers who drop a service) has consistently been in the 5-6% per month range for most major streamers other than Netflix. And when you look at the churn rate based on 12 months, it can approach a fairly horrific 30-40%.

And there are a lot of questions about how much impact this bundle will have on churn. For it to make a difference, it would have to change the behavior of people who would (for instance) cancel Disney+ in order to add Max. But decided to opt for the bundle because they can save a couple of bucks on both services.

I suspect this bundle will have more of an impact on customer acquisition costs or CAC. I am simplifying this a lot, but CAC is the total cost of sales and marketing efforts needed to convince a customer to buy a product or service. This figure is a bit complex to figure for streamers because you have to extrapolate a lot of figures, including the value certain original programming brings to the CAC number.

But let's assume it costs a streamer $100 to acquire a customer (and I'm just picking a nice round number here). You then look at the Lifetime Customer Value of that subscriber, which is the total amount of revenue that acquisition will generate during the life of their subscription. In most businesses, a good benchmark for the LTV to CAC ratio is 3:1 or better. This means that the average customer generates $300 over the lifetime of their subscription.

So if this bundle increases the LTV of the subscriber by encouraging them to stick around, that's a great thing. But one of the questions is the balance between retaining a customer a bit longer compared to the smaller amount of revenue per month this discounted price will generate.

Another question is whether the bundle can reduce the CAC. Will the publicity surrounding the rollout and the ongoing cross-promotion reduce the amount of marketing spent to acquire customers?

* This bundling idea likely closes the door on any major WBD acquisition in the near future. A soft bundle of the streamers is a relatively easy thing to manage and there aren't any major regulatory issues. But combining the various linear networks and other related businesses increasingly looks like a nightmare that no one rational person wants to tackle.

* I know that I have been rough on WBD CEO David Zaslav, but I honestly don't understand the overall strategy here. They have aggressively cut costs - arguably too aggressively - in order to pay down debt and increase the company's free cash flow. However, Max's reach in the marketplace is stagnant, and executives are discussing making additional rounds of cuts, and deals like this bundle might bring in some short-term revenue. But it also limits the upside in the future. 

I’ll have more thoughts on this as we learn more details.

ODDS AND SODS
* Today's 'Deep Streams" review is of the fun and near-adorable Magnolia series Building Outside The Lines.

* Here is a rundown of today's interesting global TV stories.

WHAT'S NEW TONIGHT AND TOMORROW

WEDNESDAY, MAY 8TH:
* Dark Matter Series Premiere (Apple TV+)
* Hollywood Con Queen (Apple TV+)
* In Pursuit With John Walsh Season Premiere (Investigation Discovery)
* Let It Be (Disney+)
* Nature - Grizzly 399: Queen Of The Tetons (PBS)
* Palm Royale Season One Finale (Apple TV+)
* Reginald the Vampire Season Two Premiere (Syfy)
* The Final: Attack On Wembley (Netflix)

THURSDAY, MAY 9TH:
* Black Twitter: A People’s History (Hulu)
* Blood Of Zeus Season Two Premiere (Netflix)
* Bodkin Series Premiere (Netflix)
* Love Undercover Series Premiere (Peacock)
* Maxton Hall: The World Between Us Series Premiere (Prime Video)
* Mother Of The Bride (Netflix) - [first look video]
* Pretty Little Liars: Summer School Series Premiere (Max)
* Thank You, Next Series Premiere (Netflix)
* The Deadly Getaway (BET+)
* The GOAT Series Premiere (Prime Video)
* The Guardian Of The Monarchs (Netflix)
* The Manny (LMN)

SEE YOU ON THURSDAY!