Here’s Why Skinny TV is Still an Experiment for Companies
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
ESPN
Fox News
ABC
AMC
$7.86
$1.55
$1.50
50¢
44¢
Discovery
Hallmark
8¢
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
8¢
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¢
9¢
Investigations
Discovery
MTV2
Nick Jr.
Comedy Central
Bloomberg
Crown Media
Scripps Interactive
Univision
23¢
HGTV
23¢
22¢
Food
Network
4¢
8¢
8¢
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
9¢
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
4¢
BBC
America
Galavision
HGTV
Univision
telenovelas
Bloomberg
Crown Media
8¢
8¢
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.