What Does it Mean That "Age of Traditional Media is Over"
Many observers would say the age of traditional media now is over, implying changes for business models, revenue sources and strategies. Content creation and content distribution now is conducted by all sorts of “new” participants. Vertical integration now is a main trend and everything changes faster.
Among the many new challenges is figuring out how to price non-linear or real-time streaming content in multi-channel bundles.
DirecTV Now’s packages suggest the price of a single channel in a multi-channel bundle ranges from 58 cents to 60 cents. Compare that to the pricing of other channels, ranging from streamed HBO to Hulu to CBS All Access, which tend to be priced in the $12 to $15 month range, as is Amazon Prime.
Consumers and suppliers disagree about value, though. Over the past couple of decades, one fact has stood out: consumers generally rate the value of any single TV channel as being worth less than those TV channels believe they are worth.
A recent survey by TiVo confirmed--again--that U.S. consumers generally believe a subscription to a single TV channel “should” cost about $2 a month, with a few channels perhaps having a “fair” price up to $3 a month.
For any product purchased by any consumer, both value and price matter. Up to this point the price of popular streaming products has not been a particular issue, as value (some amount of popular content) has a far-lower recurring cost (perhaps $11 a month compared to a linear package that offers more content, but also can cost $80 a month or more).
Once consumers start buying multiple streaming channels, the total cost obviously grows. For many consumers, a reasonable benchmark might be $40 a month, the pricing level for skinny bundles.
A consumer buying three streaming services at $15 a month spends more than single skinny bundle linear subscription. If, as some predict, every present channel will be offered on a direct streaming basis, the “value versus cost” evaluation is going to change radically.
In that scenario, buying just three services costs more than a skinny bundle would cost. It is not hard to predict that few channels will gain scale, at that pricing level. Nor is it hard to predict that new forms of bundling are going to become more popular.