Here’s Why Skinny TV is Still an Experiment for Companies

By Crayton HarrisonCrayton Harrison and Chloe WhiteakerChloe Whiteaker

Companies like Dish Network Corp., Sling TV LLC, AT&T Inc., YouTube and Verizon Communications Inc. have been trying to pull together “skinny” cable packages that would charge a reasonable price for just the channels customers really watch, without all the niche programming. Hulu LLC is the latest to offer a “skinny” package, unveiling plans for a $40-a-month service, Hulu with Live TV, on Wednesday. That makes at least seven contenders on the market or planning to enter, but providers are still trying to figure out how to streamline their offerings while making a profit.

Take AT&T’s DirecTV Now package, introduced late last year and starting at $35 a month. The basic package, called “Live a Little,” features 19 television networks that regularly average at least 1 million viewers—a pretty big audience on cable. Network owners traditionally charge distributors a monthly fee for each subscriber—depending on the size and demographics of their audiences. If you added up the monthly charges for those 19 networks, you’d get $23 a month, according to estimates from JPMorgan Chase & Co.

DirecTV Now’s $35 package

Boxes are scaled by the cost to carry

ESPN

Fox News

ABC

AMC

$7.86

$1.55

$1.50

50¢

44¢

Discovery

Hallmark

NBC

22¢

Fox

$1.50

$1.50

Food Network

History

30¢

11¢

Investigations

Discovery

TBS

HGTV

USA

$1.02

23¢

$1.07

TNT

Disney

$2.09

$1.61

MSNBC

FX

CNN

26¢

69¢

78¢

ESPN

Fox News

ABC

AMC

$1.50

50¢

$7.86

$1.55

NBC

Fox

$1.50

$1.50

TBS

USA

$1.02

$1.07

TNT

Disney

$2.09

$1.61

26¢

CNN

FX

78¢

69¢

11¢

HGTV

22¢

MSNBC

History

44¢

23¢

30¢

Hallmark

Food

Network

Investigations

Discovery

Discovery

ESPN

Fox

News

ABC

AMC

$1.50

50¢

$7.86

$1.55

NBC

Fox

$1.50

$1.50

TBS

USA

$1.02

TNT

Disney

$1.07

$2.09

$1.61

CNN

FX

78¢

69¢

MSNBC

26¢

23¢

22¢

44¢

30¢

Investigations

Discovery 11¢

HGTV

Food

Network

History

Discovery

Hallmark 8¢

So AT&T should be able to make a pretty good profit with a $35 subscription, right? Wrong. An additional $11 a month goes to pay for 33 more channels that you may or may not want but that network owners push distributors to include in the bundle. If AT&T wants to offer Walt Disney Co.’s ESPN in its streaming package, Disney offers discounts to ensure it also buys the streaming rights for ESPN2, Disney XD and Disney Junior. The list of channels start to pile up pretty quickly.

All of DirecTV Now’s networks, grouped by programmer

More than 1M viewers

Fewer than 1M viewers

Fox

Walt Disney Co.

ESPN

$7.86

Fox News

$1.55

Disney

$1.61

Fox Sports 1

$1.30

ESPN2

98¢

Fox

Business

23¢

Fox

$1.50

FXX

26¢

FX

69¢

ABC

$1.50

23¢

19¢

Disney

Junior

Disney

XD

A&E

Comcast

Time Warner

History

30¢

USA

$1.07

TNT

$2.09

TBS

$1.02

NBC

$1.50

26¢

MSNBC

A&E

33¢

36¢

Bravo

31¢

CNN

78¢

CNBC

42¢

Syfy

35¢

Lifetime

E!

30¢

28¢

TCM

33¢

Cartoon

Network

Discovery

Viacom

AMC

Discovery

Channel

44¢

11¢

Nickelodeon

78¢

TLC

25¢

AMC

50¢

Spike

TV

50¢

MTV

57¢

Other

cable

networks

$1.00

VH1

27¢

BBC

America

Animal

Planet

14¢

11¢

TV

Land

26¢

21¢

27¢

BET

27¢

CMT

14¢

Investigations

Discovery

MTV2

 

Nick Jr.

 

Comedy Central

Bloomberg

Crown Media

Scripps Interactive

Univision

23¢

HGTV

23¢

22¢

Food

Network

Bloomberg TV

Hallmark

Galavision

Univision

telenovelas

More than 1M viewers

Fewer than 1M viewers

Walt Disney Co.

ESPN

$7.86

Disney

$1.61

ESPN2

98¢

23¢

ABC

$1.50

19¢

Disney

Junior

Disney

XD

Fox

Time Warner

TNT

$2.09

TBS

$1.02

Fox News

$1.55

Fox Sports 1

$1.30

Fox

Business

23¢

CNN

78¢

Fox

$1.50

FXX

26¢

FX

69¢

28¢

TCM

33¢

Cartoon

Network

Comcast

Viacom

USA

$1.07

MTV

57¢

NBC

$1.50

26¢

MSNBC

Spike

TV

50¢

Nickelodeon

78¢

Bravo

31¢

27¢

26¢

BET

27¢

CMT

14¢

VH1

27¢

CNBC

42¢

Syfy

35¢

E!

30¢

Nick

Jr.

 

Comedy

Central

21¢

MTV2

TV

Land

A&E

Discovery

History

30¢

44¢

TLC

25¢

Other

cable

networks

$1.00

Discovery

Channel

A&E

33¢

Animal

Planet

36¢

14¢

11¢

Lifetime

Investigations

Discovery

AMC

Scripps Interactive

Univision

11¢

AMC

50¢

23¢

23¢

22¢

Food

Network

BBC

America

Galavision

HGTV

Univision

telenovelas

Bloomberg

Crown Media

Bloomberg TV

Hallmark

More than 1M viewers

Fewer than 1M viewers

 

Network

Cost

Walt Disney Co.

ESPN

Disney

ABC

ESPN2

Disney XD

Disney Junior

 

Fox

Fox News

Fox

Fox Sports 1

FX

FXX

Fox Business

 

Time Warner

TNT

TBS

CNN

TCM

Cartoon Network

 

Comcast

NBC

USA

CNBC

Syfy

Bravo

E!

MSNBC

 

Viacom

Nickelodeon/Nick At Nite

MTV

Spike TV

VH1

BET

Nick Jr.

Comedy Central

TV Land

CMT

MTV2

 

A&E

Lifetime

A&E

History Channel

 

Discovery

Discovery Channel

TLC

Animal Planet

Investigations Discovery

 

AMC

AMC

BBC America

 

Scripps Interactive

HGTV

Food Network

 

Univision

Univision telenovelas

Galavision

 

Bloomberg

Bloomberg TV

 

Crown Media

Hallmark Channel

 

12.37

7.86

1.61

1.50

0.98

0.23

0.19

 

5.53

1.55

1.50

1.30

0.69

0.26

0.23

 

4.50

2.09

1.02

0.78

0.33

0.28

 

4.21

1.50

1.07

0.42

0.35

0.31

0.30

0.26

 

3.36

0.78

0.57

0.50

0.27

0.27

0.27

0.26

0.21

0.14

0.09

 

0.99

0.36

0.33

0.30

 

0.94

0.44

0.25

0.14

0.11

 

0.61

0.50

0.11

 

0.45

0.23

0.22

 

0.27

0.23

0.04

 

0.08

0.08

 

0.08

0.08

 

When you add that $11 to the $23 AT&T pays for more popular channels, AT&T walks away with less than $1 in profit. This puts companies that want to offer a “skinny bundle” in a bind. Raise prices much more than $35 and their streaming services won’t be that competitive against traditional cable. On the other hand, if they leave out some networks to pad profits or cut prices, they may not be as attractive to viewers who want to be able to watch ESPN, TNT, FX and HGTV. DirecTV Now made one big sacrifice, introducing its service without CBS—the most-watched network—after failing to come to terms on a price.

AT&T’s strategy has been to offer a broader collection of networks, and the company has said it’s using DirecTV Now to help sell its other services. Other companies have found more success by offering less. Compared to DirecTV Now, Sling’s Orange and Blue packages have earned a higher profit because the company has left out major channels from some packages, including one without any Disney networks and another with no Fox channels.

Profit

Cost of networks with more than 1M viewers

Cost of networks with fewer than 1M viewers

DirecTV Now | Price: $35

Sling Blue | $25

Sling Orange | $20

$11.08

$10.56

$23.31

$3.70

$14.61

$11.40

$3.04

$1.69

61¢

Profit

Cost of networks with

more than 1M viewers

Cost of networks with

fewer than 1M viewers

DirecTV Now | Price: $35

Sling Blue | $25

Sling Orange | $20

$11.08

$10.56

$23.31

$3.70

$14.61

$11.40

$0.61

$3.04

$1.69

Profit

Cost of networks with more than 1M viewers

Cost of networks with fewer than 1M viewers

DirecTV Now | ­Price: $35

$11.08

$23.31

61¢

Sling Blue | $25

$10.56

$11.40

$3.04

Sling Orange | $20

$3.70

$14.61

$1.69

That’s why companies continue to tinker with new “skinny” bundle packages. The right channels at the right price point make a big difference to the bottom line.