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While Cable TV ‘Unbundles,’ Streaming Services Bulk Up

November 3, 2015, 2:00 PM UTC
Apple CEO TIm Cook speaks about Apple TV during an Apple media event in San Francisco, California
Apple CEO TIm Cook speaks about Apple TV during an Apple media event in San Francisco, California, September 9, 2015. Reuters/Beck Diefenbach - RTSCYF
Photograph by Beck Diefenbach — Reuters

TV executives see cord-cutters as a strange, exotic species that must be observed and scrutinized. I learned this while seated between several high-ranking executives from the country’s largest broadcast and cable companies one evening this summer.

Once I outed myself as a cord-cutter (actually worse, a cord-never!), my purchase decisions became the dominant topic of conversation. I may as well have said I hunt zombies in my spare time. They bombarded me with questions.

What do I watch? How do I watch? I must not like sports, they correctly noted. What do I subscribe to? Hulu and Netflix?! And HBO Now? And Spotify? And Amazon (AMZN) Prime Video?! Don’t I know that the price of all those subscriptions add up to much more than a basic cable package? Didn’t I know how irrational I was?

It was maddening to them, and I understand why. But consumers, myself included, can be irrational. Just ask JCPenny, which in 2013 stopped inflating prices for the charade of coupons and deep discounts, and nearly tanked its business in the process. Turns out customers preferred the charade.

Likewise, it’s increasingly common for cord-cutters like myself to cobble together an array of separate on-demand subscription services in lieu of a traditional cable subscription. Media companies, including 21st Century Fox, Viacom, CBS, Time Warner, Discovery, and Walt Disney, forecasted decreases in cable subscriptions this summer, and their stock prices were hammered as a result.

While TV execs criticize cord-cutters for irrational purchase decisions, the digital streaming services are in an all-out war for their money. The competition means more and better choices, making a basic cable package less attractive by the day.

With variations, Showtime, HBO Now, Hulu, Netflix, and Amazon Prime Video sell streaming TV and movie subscriptions, and Spotify, Apple (AAPL) Music, Google Play Music, Pandora, SoundCloud, Tidal, Rdio, and Rhapsody sell streaming music subscriptions. Meanwhile CBS, NBCUniversal, Dish Network, Comcast, and Verizon, have launched their own on-demand streaming services, and soon Apple TV will offer a subscription for broadcast television.

The options are overwhelming, but the competition is great for consumers. The ever-increasing buffet of entertainment is finally available on-demand, across devices, and in many cases, offline. In a bid to compete, the services are offering more and more content for less. Where cord-cutting initially looked like an “unbundling” of cable TV packages, we’re now seeing the beginning stages of a “rebundling.”

YouTube’s recent launch of YouTube Red is the best example. The $9.99 per month subscription offers ad-free YouTube videos that can be saved and played in the background while using other apps. There is exclusive content from YouTube’s biggest stars, making the service appealing to YouTube’s fanatical young audience. But YouTube Red’s biggest competitive advantage is that it includes free streaming services from Google Play Music(GOOG). In other words, if you subscribe to YouTube Red, you don’t need Spotify.

Likewise, Spotify is ramping up its own answer to video streaming services. In May the company announced “Spotify Now,” a section in its app that will offer video content from outlets like Vice News, Comedy Central, MTV and BBC. Spotify’s splashy press events don’t always pan out—the company convinced Rolling Stone and Billboard to build apps for its desktop service with great fanfare in 2011, only to quietly kill the feature later, for example—and Spotify Now is still not widely available, five months later. (A rep says the feature is being rolled out “incrementally.”) But if Spotify Now works out, the company’s 20 million subscribers will get a bunch of the same content they watch through other video services for no additional cost. It’s a compelling offer.

The bundling of music and video creates an advantage for YouTube Red, Spotify and Amazon, which has always offered both music and video through its $99 a year Amazon Prime subscription, in a crowded competitive field. On their own, none of these offerings is comprehensive enough to replace a basic cable subscription. But for people who never subscribed to begin with, the options are only getting better. There’s even less of a reason to wait for the cable guy. TV execs: Take note.

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