Streaming Bundles Benefit Both Buyers and Sellers

Bundles of streaming services always have seemed likely because they provide benefits for sellers and buyers. The proposed ESPN, Fox, Warner Brothers Discovery sports bundle; the Peacock-Netflix-Apple TV bundle and the early ESPN+, Hulu, Disney+ bundle provide examples.  

Product bundles generally have appeal for buyers because they provide more value, typically with some savings over buying each of the products individually. But bundles also appeal to sellers because they tend to create value and distinctiveness, while reducing churn and creating more product “stickiness.” 

The same bundle of streaming services value (more content for less money) also means barriers to consumer churn. It is a lot easier for a consumer to cancel a single service than a bundle of three, for example, as the cost of buying the remaining two services might be quite significant. 

So streaming bundles provide upside for sellers on both the customer acquisition and customer retention fronts, while trading some amount of gross revenue for higher lifetime account value and possibly some lower marketing expenses. 

Market share considerations also are important, as contestants scramble to build leading positions in an overcrowded marketplace. Bundles can help suppliers grab market share faster. 

Generically, one might attribute the value of bundling in several areas, including customer acquisition, gross revenue impact, churn reduction and market share gains. 

• Customer acquisition benefit (25-30%)

• Gross revenue upside (25%)

• Churn reduction, higher lifetime customer value (20-25%)

• Market share gain (20-30%)

As almost always is the case, Comcast will restrict the new streaming bundle offer to customers who already buy either linear video or internet access from Comcast, attempting to create a value moat anchored in one of the core legacy services, as one can only buy the Xfinity mobile service unless one also is a subscriber to either linear video or home broadband. 

All those key problems--customer acquisition; market share, gross revenue, churn and profitability--are in principle aided by the new streaming bundle. 

If one assumes the stable eventual market structure will include leadership by about three firms, including Netflix, Prime Video and the Disney properties, it is clear that the other providers must try and break into that top group, or create some other valuable role that contributes materially to firm profits. 

Amazon always has seen Prime Video as a feature driving its e-commerce subscriptions, for example. So many analysts seem to discount Prime’s market share, which by one measure (subscribers) would place it first, ahead of Netflix. The complication is that Prime Video is bundled “as a feature” of Amazon Prime, the e-commerce platform. 

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Streaming Service	Estimated U.S. Market Share (%)	Time to Breakeven (Years)	Estimated U.S. Subscribers (Millions)
Netflix	32%	Achieved profitability (2017)	70+
Hulu	20%	N/A (Owned by Disney - profitability not publicly available)	40+
Disney+	15%	Profit in second quarter 2024	80+
Amazon Prime Video	12%	Included with Prime membership, profitability not a primary focus, might be a valuable loss leader.	100 million to 200 million (estimated U.S. and global figures)
HBO Max	8%	N/A (profitability timeline unclear)	40+
Apple TV+	5%	N/A (Focus on high-quality originals, profitability not a main priority)	20+ (estimated)
Others (Paramount+, Peacock, etc.)	8%	N/A (Varied strategies, profitability uncertain)	Varies

Sources:https://www.statista.com/statistics/1035628/most-in-demand-streaming-services-global-share/, https://www.parksassociates.com/, https://www.ampereanalysis.com/, and industry reports.

Aside from customer acquisition and market share issues, account churn remains a huge issue for video streaming service providers. 

Account churn can range from as much as 60 percent on an annual basis to as low as 30 percent. At the high ranges, the equivalent of the entire subscriber base turns over about every two years. At the lower ranges, the equivalent of the entire subscriber base turns over about once every three to  3.5 years. 

Streaming Service Tier	Estimated Annual Churn Rate
Top Tier (Netflix, Hulu, Disney+)	30-40%
Mid Tier (HBO Max, Peacock, Apple TV+)	40-50%
Lower Tier (Niche or Ad-Supported)	50-60%

That poses business model issues as high effort must be expended to acquire new accounts, while profit margins for short customer life cycle accounts is lower than for long-tenured accounts. Bundling is seen as helpful in that regard. 

So watch for more bundling efforts.

AI Wiill Indeed Wreck Havoc in Some Industries

Creative workers are right to worry about the impact of artificial intelligence on jobs within the industry, just as creative workers were right to worry about the impact of the internet on jobs within the legacy content industries (print media, especially, but also video, music). 

Survey/Study Title	Key Findings	Source
These entertainment jobs are most vulnerable to AI, study says (Jan. 30, 2024)	Over 50% expect AI to displace sound designers in 3 years. - Over 40% fear AI replacing music editors, audio technicians, and sound engineers. - Around 33% anticipate similar effects for songwriters, composers, and studio engineers.	Los Angeles Times
A Survey of 31,000 Employees Shows 49 Percent Fear AI Will Steal Their Jobs. They're Right to Worry	49% of employees fear AI replacing their jobs. 70% hope AI will manage workloads, not replace them.	Inc. Magazine
EY research shows most US employees feel AI anxiety	75% of employees are concerned AI will make jobs obsolete. - 65% are anxious about AI replacing their jobs.	EY

If you worked in any managerial position in U.S. ad-supported media back in 1996, you are well aware of the huge shifts that have taken place in the use of ad venues. Print media, linear video and radio have taken huge hits, while online digital venues have skyrocketed. 

Many--perhaps most--of the business issues facing managers of ad-supported assets flow directly from those shifts in activity and venues. 

Source: Gemini

Put simply, digital now claims up to 82 percent of all U.S. ad placements and revenue. Print has declined from 42 percent to less than three percent. Linear video dropped from 38 percent to 16 percent. Radio dipped from 10 percent to half a percent. 

Channel	1996 (Billions)	1996 (%)	2023 (Billions)	2023 (%)
Print (Newspapers, Magazines)	80.0	42.1%	10.0	2.7%
Linear Video (TV Broadcast, Cable)	72.0	37.9%	60.0	16.2%
Network Radio	10.0	5.3%	2.0	0.5%
Other (Radio Spots, Out-of-Home)	28.0	14.7%	18.0	4.9%
Digital Ads (Search, Social Media, Display)	-	-	300.0	81.7%

source: IP Carrier

Will Else Will Apple Do to Support AI?

Apple is negotiating to use ChatGPT features in Apple’s iOS 18, according to a Bloomberg report. That raises the question of what else Apple might eventually do in the artificial intelligence area, since that rumored deal seems centered on adding chatbot features. 

Other approaches would be needed to support many of the anticipated iPhone use cases, ranging from speech-to-text to translation to camera functions or health and fitness features, for example. 

Some of those approaches will likely lead to more custom chips. Apple's A-series chips already power iPhones, iPads, and Macs, so moves to add on-board AI processing capabilities would be logical. Neural engines or co-processors also are possible avenues. 

Core ML is Apple's framework for developers to build and integrate AI features into their apps, and likely will be another avenue of development.

That points up a major difference between consumer and enterprise or business use cases: consumer use cases will favor on-device implementations; enterprise will favor remote processing. In the area of personalization, for example, enterprise processing typically can rely on remote processing, as presently is the case for most AI-related personalization efforts in the advertising and content areas. 

Many consumer use cases for personalization will be more contextual, based on location (typically on a smartphone, in a mobile context) and might require more local processing. The other area of activity trackers might often require real-time processing, which will lean towards on-board processing as a consequence. 

Likewise, facial recognition and other security features might need to be processed on board, rather than remotely, as will other image processing and text-to-speech or speech-to-text use cases. Real-time translation also will tend to work best on board. 

Feature	Consumer AI Examples	Enterprise AI Examples
Personalization	Recommendation engines in shopping apps, news feeds curated based on user preferences.	Targeted marketing campaigns, personalized customer service interactions.
Efficiency & Automation	Smart assistants for scheduling appointments, voice commands for device control.	Robotic Process Automation (RPA) for repetitive tasks, predictive maintenance in manufacturing.
Data Analysis & Insights	Activity trackers that analyze fitness data, sleep monitoring apps that provide personalized recommendations.	Customer sentiment analysis from social media, predictive analytics for inventory management and demand forecasting.
Security & Fraud Detection	Facial recognition for unlocking phones, spam filtering in email applications.	Fraud detection in financial transactions, anomaly detection in network security.

Even looking only at generative AI, to support content creation use cases, enterprise applications will tend to work when supported by remote processing, as many of the activities are not extremely latency dependent. 

source: McKinsey, Seeking Alpha 

Will AI Supplant IoT?

It might be inaccurate or too early to determine whether the touted “fourth industrial revolution” is coming, and, if so, what the hallmark will be. Some have argued that the “internet of things” underpins such an advance, but there are likely going to be growing arguments that artificial intelligence is a better moniker. 

Up to this point, many in the manufacturing ecosystem have been talking about “industry 4.0,” for example, making IoT the focal point. 

But there is an argument to be made that AI will eventually be seen as a general-purpose technology that underpins many, perhaps most industries, as GPTs tend to do. If so, AI will probably emerge as the more-widely-accepted description. 

As sometimes happens, multiple technology platforms will combine to create new platforms. One of the supposed hallmarks of 5G mobile networks, for example, is the emphasis on “machine-to-machine” communications to support IoT. But sensors and the ability to automate machine actions based on real-time data also is crucial for IoT and “smarter” infrastructure and appliances. 

And since most of us expect AI to be a part of virtually every process, it will be hard to clearly delineate the impact of AI as compared to IoT (networked, sensing machines). And industrial processes, while important in their own right, have led to vast changes across societies, beyond manufacturing. 

Industrial Revolution	Key Advances	Description
First (18th Century)	Steam Engine, Mechanization	Transition from manual labor to machine-powered production.
Second (19th Century)	Assembly Line, Electricity	Mass production using standardized parts and assembly lines powered by electricity.
Third (20th Century)	Electronics, Computers, Internet	Automation using electronics and computers, leading to digitization of processes.
Fourth (Present)	AI, IoT, Robotics	Integration of cyber-physical systems, automation, and intelligent machines powered by AI and fueled by data from interconnected devices (IoT).

There always are many new technologies developing commercially. But most are not GPTs. And it is GPTs that have the most far-reaching effects. 

Is Streaming Really "Becoming Cable TV?"

There is a popular line of thinking that the creation of bundles of streaming services means streaming is becoming the new cable TV. It’s an easy conclusion, but is more nuanced than immediately appears. 

The evolution of television has been in the direction of “more choice” while the evolution of video has been in the direction of “more convenience.” Cable TV began life as a distant signal importation service that brought metro-area over-the-air TV broadcasts to rural areas beyond the range of the over-the-air transmitters. 

Being able to watch broadcast TV was, in that use case, a form of greater choice. That began to change with the advent of satellite-delivered “channels” or networks such as Home Box Office and Superstation TBS, which kicked off a decades-long evolution of specialized content formats (news, sports, movies, childrens’ programming, drama, comedy, “classic” fare, music, history, learning and shopping, for example). 

All those channels and networks represented an explosion of choice, bundled together in subscription format, but remaining a “broadcast,” linear, scheduled service. Among the nuances is the ability to use physical and then digital recording to time shift viewing and achieve some amount of “on-demand” viewing. 

The “video” business offered different value, namely “on-demand” viewing whose key attraction was “convenience,” the ability to watch what you wanted, when you wanted. Early cable TV “pay per view” services were an effort to capture some of that “convenience” value. 

The key difference from cable or broadcast TV was the use of pre-recorded media to allow consumers to rent or own individual titles, as well as time shift linear content for more-convenient viewing. The advent of videocassette recorders enabled the early trend and was followed by DVDs, then eventually by Netflix and streaming services. 

Also, cable TV is a “TV viewing” service, while streaming has been “view on any device with internet” from the start. Again, the situation is nuanced, as cable services add some amount of virtual pause, rewind and fast forward control, plus launching their own branded streaming services in some cases. 

The new “bigger bundles” still remain focused on on-demand viewing, though streaming services also are adding more “live event” programming, often sports programming. Even the bigger bundles of several services are still based on offering “convenience” (both one bill for several services; more-attractive pricing; watch what you want, when you want). 

Curation still matters, both for “choice” services (cable TV and programming networks) and “convenience” services (on-demand streaming services) as no single service can license but a fraction of all available content, forcing curation choices. 

And while many note the role of “original content” for the streaming services, unique content has always been important for broadcast and cable TV networks, to attract viewers (creating audiences to monetize through advertising) and create brand loyalty. 

The nuance is that cable TV networks have always relied on huge amounts of content across scores of channels (networks) to create a “something for everyone” means of attracting and retaining subscribers. 

Streaming services also rely on unique and original programming as a way of creating distinctiveness, acquire and retain subscribers, but with less ability to rely on the huge array of genres possible on cable TV services featuring hundreds of channels (networks). 

Broadcast and cable TV networks always curate their content, but streaming services also create collections by genre for the convenience of their customers. 

Still, a bigger bundle of streaming services still fundamentally remains a “convenience” product whose primary value is on-demand consumption, rather than becoming a “choice” product such as cable TV. 

The picture is nuanced as streaming services start to add more “live” or “event” programming with a scheduled initial broadcast format, and cable TV has added digital time-shifting options. 

But the fundamental positioning remains: cable TV always has been about “more choice” while streaming (and its precursors video and DVD rental) has always been about “convenience” and on-demand consumption, even as curation, original and unique content and “view on any screen” plus on-demand features are found to some extent on linear and on-demand services.