An entertainment-only channel bundle priced around $10 has the potential to draw 4.6 million new subscribers into the pay-TV ecosystem, analyst firm MoffettNathanson says.
Citing research from Altman Vilandrie & Company, the firm predicts that, on top of the new subscribers, an entertainment-only bundle at that price point would also cannibalize 9.2 million pay-TV subscribers. However, should the price increase to $30, the number of new incremental subscribers would drop to 800,000 and cannibalization would account for 1.4 million subs.
As the firm points out, about 17% of U.S. households currently don't have pay-TV services.
MoffettNathanson estimates the wholesale price for a bundle including all channels from AMC, A+E, Discovery, Scripps, Viacom and some independent networks would be around $10. At that rate, an entertainment-only bundle could represent a much stronger financial proposition that the many streaming TV services priced in the $35-$40 range.
“The lower wholesale price of ~$10 creates a low enough cost bar to generate significantly more demand, revenue, and gross profit than the current crop of vMVPD bundles out there today,” the firm wrote in a research note.
The prospect of an entertainment-only channel bundle—that excludes sports and only includes broadcast networks via OTA signal integration—has been floated extensively by Viacom CEO Bob Bakish. Earlier this week, Bakish said he still expects a non-sports bundle to become available to consumers within the calendar year, and that the product would likely be priced under $20.
"With a 30% margin you can price it in the low-teens to up to $20 depending on how much product. Our sense is you want to be at the lower end of that price point to really have something to appeal to cord-nevers and again create a catalyst at that entry point in the market," Bakish said.
Discovery Communications CEO David Zaslav has echoed Bakish’s sentiments about a skinny bundle priced around $10, and said that demand for SVODs like Netflix show that consumers are interested in entertainment options at that price point. Zaslav added that operators outside of the U.S. have already launched similar products and they’ve served as accelerators for the market.
“That’s what’s worked everywhere else in the world,” Zaslav said.