"Super bundles" are coming in the video streaming business.
If there is anything we can “know” about consumer preferences for buying video content, it is that convenience, price and simplicity are desirable. In either linear or “streaming” eras, consumption therefore always has involved some amount of bundling.
Content was aggregated into broadcast channels; then cable TV channels and now streaming service brands.
What consumers never have had, in the video format, is a la carte access to individual shows. That has remained a staple for the theatrical exhibition business (movies shown at movie theaters), but the video business always has involved bundling.
And that means the next era of streaming evolution will involve the creation of “bigger” or “broader” bundles that essentially replicate the value of the older linear format: pay one price, get lots of content, at one place.
Whether the packing is “channels” or “streaming services,” some form of bundling always is required, as the cost of distribution of single shows or episodes is too difficult a business model, either for suppliers or consumers. Simply, the cost of selling or buying a single episode is too high, at the volumes most consumers will prefer.
In addition, there are indirect costs:
The cost of maintaining and updating the underlying technology infrastructure.
The cost of managing and protecting intellectual property rights.
The cost of complying with regulations.
The cost of managing and resolving disputes with content creators and distributors.
Of course, on-demand distribution costs can be quite different depending on the delivery platform: retail stores renting DVDs or CDs; retail delivery by mail or internet delivery.
As a rule, bundled delivery using internet mechanisms offers the lowest overall delivery costs, compared to physical media.
The point is that full a la carte access to individual titles is impractical for many reasons. No single firm can afford to amass the full available catalog of created video content. Given the typical amount of video content people watch,
By age group, people watch somewhere between three hours and 4.5 hours of content daily.
18-24: 4 hours, 37 minutes
25-34: 3 hours, 54 minutes
35-44: 3 hours, 47 minutes
45-54: 3 hours, 31 minutes
55-64: 3 hours, 10 minutes
65+: 2 hours, 50 minutes
Assume the “typical” item is a 20-minute episode. That implies delivery of between nine and 14 episodes daily. Using a full on-demand model, that implies a cost of at least $3 to $9 daily, or about $90 to $270 per month.
If you think about the pricing of streaming and on-demand services, it seems clear that consumers will not willingly pay such amounts for full a la carte access, even if it were possible.
At the moment, declining take rates for linear video suggest that format is not preferred, even at typical costs of between $80 and $100 a month. The ultimate amount of spending for streaming alternatives is still developing, but many households already buy multiple subscriptions.
The average U.S. household subscribes to 4.2 streaming services, up from 3.4 subscriptions in 2022, according to a 2023 survey by Leichtman Research Group. The survey also found that the average household spends $67 per month on streaming services, up from $55 in 2022.
Obviously, in an a la carte environment (were it possible), consumers would pay more than they presently do to watch video content delivered using the internet, the most-affordable platform.
All of which explains why full a la carte buying (anything you want, when you want it) never happens.
Instead, the business terrain centers on amalgamating enough content, at a low-enough monthly price, to satisfy enough customers so the business can survive. So far, most streaming services offering on-demand viewing have prices ranging from $5 to to $15 a month.
Such prices do not seem sustainable, at such levels, financial reports suggest, as only Netflix actually seems to earn profits.
The full issue is that the older linear TV model also is shrinking at a time when streaming investments are being made, so it actually is a combination of lower revenue and higher costs that are the problem for streaming providers.
In other words, content producers are losing scale in a business where scale matters. Note especially the loss of advertising revenue for streaming models, compared to linear models.
The point is that cost, convenience and simplicity have always driven the video business towards bundling, and that is unlikely to change in the streaming era of video delivery.
To prosper, streaming services will have to gain greater scale, and that also means fewer but larger suppliers. It likely also means a reconstitution of the older cable TV bundled model of one flat price for lots of content.
At first rather informally, then likely later formally, bundles of popular streaming services--”super bundles”--will be offered to consumers, where paying one price gives access to a few or several top services.
In the early days, this will take the form of a “super bundler” aggregating two or more services into a package, often with other services such as mobile or internet access (home broadband) service.
It’s coming. Consumer demand and supplier necessity will drive it.
