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Understanding the Economics of Streaming Bundles

Understanding the Economics of Streaming Bundles

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When streaming first became a thing, it promised to replace the need for cable TV and lower prices for consumers. Why have hundreds of channels, when you can only pay for what you actually watch? But we all know what happened next. 

A plethora of streaming services mean that many households spend as much money on the newer services as they used to on cable. For those who didn’t cut the cord, everything has just gotten more expensive, especially as streamers are worrying about their bottom line.

With an ever growing number of streaming options — from Netflix (NFLX) to Disney+ (DIS) — platforms are feeling the competition, and are vying to retain consumers. This has sparked a “new” trend that might sound a lot like an old one: the bundle. 

Package Play

Comcast is the latest provider to offer a discounted bundle, including the cheapest plans for Netflix, Apple TV+ (AAPL), and its own Peacock service for $15 per month. Consumers with separate subscriptions to these three services currently pay $23 per month, so on paper, this bundle offers a more than 30% discount. But it’s not that simple. 

For one, Comcast’s bundle is only available to Xfinity customers who already pay for internet — or, yes, cable TV — effectively incentivizing customers to continue paying for a far more expensive service. This is not the case for rival offerings, such as Disney and Warner Bros. Discovery’s (WBD) new bundle containing Disney+, Hulu, and Max.  

Streaming Synergy

One of the biggest challenges streaming services face is churn: Customers subscribe, watch what interests them, and then promptly cancel their subscriptions again. This can be a wise financial strategy for viewers, but is a headache for platforms. 

By bundling services, platforms make it harder for customers to cancel one service without canceling them all. But as streaming packages become more reminiscent of the cable model, consumers may become hesitant to overspend on content they’re not watching – bundle or not.

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