Cable TV Strikes Back with New Streaming Bundles

It seems like what’s old is new again, as cable TV companies are now selling bundles of streaming services in an attempt to retain subscribers. Will it work? It might, and in fact, it could be a significant money-maker for these companies. I dive into the details in my latest video.

Comcast recently announced a bundle that includes Peacock (which they own), Netflix, and Apple TV Plus at a “vastly reduced price.” The catch of course is that it requires customers to have an Xfinity Internet subscription first. The goal is to add value for their customers while simultaneously taking a bite out of other streaming companies’ profits.

This move by Comcast is intriguing for a couple of reasons. First, it’s another bundle they can offer to try and keep customers from leaving. Second, it highlights the stark difference between the cable TV business and the streaming business.

Cable TV plans often come with hefty price tags, in my area ranging from $24 to $90 per month, plus usually another $30-40 in local broadcast and rental fees. These plans include the infrastructure to deliver TV to your home and fees that Comcast has to pay back to the networks for each subscriber. This model puts cable companies at the mercy of big cable networks, who demand fees and prominent channel placement.

On the other hand, the internet side of their business is primarily infrastructure-based. Comcast doesn’t have to pay anyone for the bandwidth you use to access the internet. This means most, if not all, of the money you pay for internet service goes back to Comcast, making it a significant profit driver. As people cut the cord on cable TV but keep their internet, Comcast actually benefits because they make more money per internet subscriber than per TV subscriber.

To make things even sweeter for Comcast, they not only avoid paying for content but also get paid by streaming providers. Streaming services like Netflix have to pay Comcast to place their servers within Comcast’s network to ensure smooth streaming performance for Comcast customers. This arrangement, while seemingly at odds with net neutrality principles, is perfectly legal and remains opaque to consumers.

Comcast is a master of bundling, offering various services like Xfinity Mobile, cellular phone service, and discounts for bundling multiple products. This strategy makes it difficult for customers to leave because buying these services separately would be more expensive.

Smaller ISPs are also getting in on the bundling action, partnering with streaming services to offer convenient packages. Streaming providers like Roku are offering discounts on lower-tier streaming services to lock you into their ecosystem. Even competing services like Disney and Warner Bros. are bundling their streaming platforms together.

The financial struggles of streaming services are a driving force behind this bundling trend. Disney Plus, for example, lost subscribers after raising prices, and Paramount is facing internal turmoil. These companies are realizing that consumers demand high-quality original content and are quick to unsubscribe if they don’t find it.

Shareholders are pressuring streaming companies to reduce churn rates (the rate at which customers cancel subscriptions) and become more like Netflix, which boasts a low churn rate despite price increases and restrictions.

So, who stands to win in this bundling war? ISPs like Comcast are likely to benefit as they retain customers and make it harder for them to switch providers. Streaming providers also win by reducing churn rates, even if it means slightly lower subscription revenue.

The future looks to be shaping into a a familiar landscape where consumers are disincentivized or completely unable to go a la carte with their streaming services. It will become less convenient and more expensive to subscribe and unsubscribe to individual services as many consumers do now.

Consumers are in the driver’s seat but will these bundling discounts be enough to buy back some of that freedom? We shall see.