I read several reports from the current International Broadcasting Convention in Amsterdam that there is a lot of talk among programmers about a dislike of the skinny bundles that are being offered by companies like Sling TV. This is a convention of mostly programmers and companies that produce content. FierceCable reported on the convention and wrote an article titled Execs from Discovery, Roku and others warn the skinny bundle will hamper content creation.
I can understand the perspective of the programmers. Consider Discovery. They are one of the more egregious programmers when it comes to making cable companies take all of their content. Discovery benefits tremendously from the bundle because given a choice, many cable providers would elect to not carry at least some of the many Discovery networks.
There is no doubt that the move to skinny bundles is going to be bad for programmers like Discovery as they lose revenues on many of their networks. Discovery currently has 13 different networks in the US and a few more internationally. And obviously skinny bundles like Sling TV won’t elect to carry many, or even any, of them.
But Discovery and the other networks are trying to swim against the tide if they think there is any way to stop the move towards smaller line-ups. It’s what people want. Numerous studies have shown that most households only watch a very small fraction of the 200 or 300 channels that are delivered to them in the big bundles. And people in general are getting fed up with paying for all of them.
Netflix and Hulu got this all started by letting people watch individual shows rather than networks. And that is what people really want. They create a loyalty to a given show much more than to a network. Interestingly, Discovery takes advantage of this trend already and some of their series like MythBusters, How It’s Made, and River Monsters are available on Netflix.
The real question being raised in Amsterdam is if the trend towards skinny bundles is going to stifle the creation of unique content. It’s a good question and only time will tell. My gut says that it is not going to cut down on the making of good new content because there are profits to be made from coming up with a popular show.
What might change is who is making the content. There is no doubt that over time the move to skinny bundles will hurt traditional programmers like Discovery. They may have to shut down some of their networks if not enough people are willing to pay for them. But these networks were only created in the first place in the artificial environment where millions of homes were guaranteed to pay for a new network. One of the primary reason that the big bundles are breaking apart today is the greed of the programming conglomerates that created and forced numerous new networks on the cable companies. What we are now seeing is that with the Internet people have the ability to push back against the crazy big bundles they have been forced to buy.
So it is quite possible that a company like Discovery will lose a lot of money compared to what they make today, and perhaps as part of that transition they won’t produce as much unique content. But I think that somebody else will. We already see companies like Netflix producing new content. There are even rumors about Apple producing content.
As long as content can make a lot of money, people are going to take a chance for the big bucks. One has to remember that most unique content doesn’t make money today. Many movies don’t recover the cost of producing them if the public doesn’t like them. When these companies talk about creating new content, what they really are talking about is producing hits. One very successful series or movie can produce a huge profit for the producer of the content. As long as that big carrot is dangled there are going to be many who are going to chase the big dollars.
I really didn’t mean to pick specifically on Discovery and they are just an example. You could substitute any of the other large network conglomerates above and it’s the same conversation. The fact is, content delivery is changing and there is going to be fallout from that change. It’s likely over time that some of the existing large conglomerates might go under or disappear. That is the consequence of this kind of fundamental change. But it’s happened to many other industries over the last decades and there won’t be anybody lamenting the fall of a Discovery any more than people are nostalgic about Kodak. All people are really going to care about is that they can watch content they like and they aren’t really going to care much about who created it or who profits from it.