Why Service Bundling is a Thing of the Past

Media technologies conceptReed Hastings, the CEO of NetFlix, recently predicted that broadcast TV will be dead by year 2030. Companies like NetFlix, Amazon Prime, and Hulu are the industry leaders of this trend of streaming on-demand services.

If we no longer need to pay for cable, then I guess it’s time we do away completely with our service bundle. Whether you have a variation of triple-play or double-play, bundling your cable, internet, and home phone no longer makes financial sense.

The first disrupter to the status quo was the introduction of VoIP, which has significantly reduced the costs of the average household phone bill. In 2013, the average household spent $30 per month on their home phone. Consumers who use VoIP services rather than the traditional landline can get plans as low as $6 per month, and have access to a larger array of features. While their are significant savings to be had, VoIP alone doesn’t seem to be the straw that will break the camels back in the service bundling world.

nielsendata2
Data from Nielsen

The second disrupter to the status quo has come in the form of streaming services and paying only for what you watch, or À La Carte. Just last month, CBS became the first cable network to join the likes of NetFlix and Hulu. HBO has also announced plans to offer streaming access to their content, ushering in a new age in the entertainment industry. Reed Hastings could be proven correct as more networks are destined to venture into this new distribution channel.

NetFlix costs current members $7.99 per month, and new members will have to pay $8.99 per month. This is a steal compared to normal cable bills, which can run well over $50 per month, but is NetFlix enough? If not, you can add CBS streaming for an additional $5.99 per month, or add HBO (the price hasn’t been announced yet). More options are sure to come into the market over the next few years, and finding shows and movies to stream will become ever more simple.

The biggest question in this new world of À La Carte is the lucrative contracts between networks and sports leagues. CBS has announced they will not offer NFL games as part of their stand-alone streaming service, which last year drew 108 million viewers during the super bowl. It is estimated that an ESPN standalone service would have to price arohappy male friends with vuvuzela watching sportsund $30 per month to maintain the revenue they see through bundling. While the sports dilemma is a major issue, CBS has confidence that the NFL games will be streaming in the near future.

The third and last frontier of service bundling, is probably also the most important. Household internet service must be both speedy enough to stream whatever it is you want to stream, and reliable enough not to fail on you and thus disrupt your VoIP service.

Service providers may be upset to see all of their customers doing away with the bundle, so the least you could do for them is stick with their internet offering. Households today are becoming more and more reliable on the internet, like LG’s new smart fridge, so maybe investing in a high speed internet isn’t the worst idea.

 

Cheers,

Dan Brady

One thought on “Why Service Bundling is a Thing of the Past

Leave a Reply