Bundling — the answer to the sweet shop problem

Bundling — the trend to watch in 2024?

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The streamers want to improve revenues, cut churn and attract customers — even if it means working with the competition, bundling just might be the answer

Streamers are raising prices, household budgets are ever stretched and there are too many options in the market. Remember when you were a kid, buying sweets at the cinema before a film (or Pic ‘n’ Mix from Woolworths if you’re as old as some of us!)? They all look very tempting, but the look on your parents’ faces when they saw the price — it’s the same with streamers. With a few clicks you add another one to your collection, watch the show you’ve been keen to watch then think about the costs later when they all come up for renewal.

What does this all mean for the market?

We’ve seen both carrot and stick measures from the streamers. The stick is cracking down on password sharing — the carrot is offering reduced pricing if you take advertising. The ultimate example of this is the so-called FAST (Free Ad-supported Streaming Television) and the biggest recent success is probably Prime Video’s FreeVee.

For a more detailed look at what’s happening, we recommend this informed study from Deloitte — Driven to tiers: Streaming video services look to up their profitability game with viewers. If nothing else, full marks for the title.

So what is bundling, and why might it be the answer?

Bundling looks like a win-win (it’s sensitive to wide swings in consumer purchasing, but looks attractive in the current market) you want two services, why not get both at once cheaper? You save money, what about the streamers? While individually they seem to lose, there are two things in their favour:

1) You are less likely to cancel a cheaper bundle than one of two individual packages

2) You also commit (in many cases) to a period, so all streamers get some income for a period

3) Across a volume of users, it’s better money to sell more things a little cheaper than have fewer sales.

There are subtleties in the market, pricing and so on, but there’s certainly a case for bundling.

What’s the reality in the market?

In many ways we’ve had bundling for some time. Sky has an option to include Netflix with Now, and Sky Cinema can get Paramount+.

There’s also Virgin Media’s Stream Box, letting you swap streamers out on a monthly basis. Arguably the Virgin Media option is actually an aggregator as (eg) Firestick / Apple TV can be, bringing subscriptions to one point but not offering discounts per se but there is a 10% credit return. If you want to know more, follow the link.

More recently, market gossip on a possible bundle of Apple TV+ with Paramount+ caused a near 10% rise in Paramount share price in one day. The Hollywood reporter also covers this story, as well as the Verizon bundle of Netflix with Max. The latter might be a point option (only available in some circumstances), but it all shows creativity in the market and as consumer pressures are likely to continue through 2024, we suspect this is a topic we will hear more about.

It’s also a lot less extreme than (eg) mergers and acquisitions — while we still imagine the market will consolidate medium to long term, bundling reduces the imperative for simplification.