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OTT Channel Bundles Coming in 2015, But Don’t Count on Savings
Will Americans cut the cord in the new year and give up their pay TV subscriptions? Sadly, online bundles won't be significantly cheaper.

The OTT future many of us have dreamed of is almost here, but reality is intruding on our beautiful vision.

For years, we’ve been looking forward to the day of reasonably priced compact online bundles, where we could get only the channels we want and pay less than we do currently, then thumb our noses at those greedy cable and satellite companies.

I suspect the average U.S. household spends around $80 or $100 per month on pay TV, while watching maybe a dozen channels regularly. Replace those subscriptions with a $30 bundle of popular channels, plus $10 for an on-demand service and another $10 per month for a la carte movies, and you’ve got a tidy savings.

It’s a great story, right? We all hate the cable companies. The latest American Customer Satisfaction Index, released in May 2014 by the University of Michigan’s Ross School of Business, found that Comcast and Time Warner Cable were the two most hated companies in the country. Who wouldn’t like to save money while sticking it to cable?

Now that we’re on the edge of OTT bundles becoming a reality, however, it’s easier to see what those options might cost. Sadly, the outlook isn’t good.

Sony’s upcoming OTT bundle could include 100 channels and cost up to $80 per month according to an October report in the New York Post. Unnamed sources say Sony had plans to break up the bundle, but couldn’t get it done.

Dish’s upcoming smaller OTT bundle might cost $20 to $30 per month, Variety reported around the same time, but that price won’t include local channels, which would cost extra. That could put the price on a level with entry-level cable subscriptions.

To get an analyst’s perspective on what OTT bundles might cost, I spoke to Gavin Bridge, vice president of TV insights for market research firm Ipsos MediaCT. Bridge doesn’t expect the studios that own the most popular cable channels to take a dollar less just because they’re selling to an online audience.

“Viacom has been quite a cagey negotiator in the last couple of years with all of the MSOs and the providers in terms of getting more money from them,” Bridge says. He imagines Viacom would charge at the very least the same that it’s charging the MSOs to carry those channels. He adds, “It’s not going to give it away at half price just because it’s online. It’s going to try and maximize OTT as another revenue stream.”

Not only are the studios tough negotiators in terms of price, they also insist that operators take less popular channels along with the popular channels they actually want. OTT bundles could suffer from bloat, just as cable and satellite offerings do.

So what are OTT bundles likely to cost?

“You’re probably looking at at least $50 a month for a decent package. People who have that pipe dream of paying one dollar per network, it’s never going to happen,” Bridge says. “I think that it will be within the realms of current cable. I don’t think you’ll see it suddenly be about $20, and everyone will just switch and dump their providers.”

For many, that represents a savings, but keep in mind that that’s only basic channels. Once people total up the extras they need—such as a premium movie service, Netflix, or sports programming—it might not be worth the hassle. Bridge points out that Time Warner Cable, which he currently uses, offers a starter bundle that includes HBO for $30 per month. For some, an OTT bundle would cost more than they currently pay.

The likely scenario is that OTT bundles will attract some young adults, but won’t feel worth it to older viewers. Pricing matters above all, and we won’t see real damage to the pay TV companies until consumers have a compelling reason to switch.

This article appears in the January/February 2015 issue of Streaming Media magazine as "OTT Bundles Are Coming, But Don’t Count on Savings."

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