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I would classify this as the most rational "insider alarmist" version of the anti-unbundling argument. There will certainly be discomfort upon the arrival of unbundling, but this article ignores long-term adjustments of the ecosystem. Here's five gaps that aren't considered: 1) Bundling will still exist, but just not in the current 100 channel, one-size-fits-all variety. Media conglomerates will bundle directly to consumer - that's how Disney gets distribution for the SOAP channel, they bundle it with ESPN to the cable provider. Various channels may team up. Bundling across media types will happen (MSNBC + NYTimes; Fox News + WSJ). Massive direct-to-consumer marketing groups will be formed. 2) Sports Rights will cost less, not more - Sports leagues know hoe much ESPN makes, and they make sure they get their cut. Eventually, costs will decrease. 3) Sports providers will differentiate their product offering, and be free to sell different subscriptions to different tiers of fans (TV, internet streaming, mobile devices, value add services). The same, to a lesser degree, will apply to other genres 4) The average cable bill may be $40, but the key is what is the LTV of a cable customer (including all services - cable companies make profit in other areas like internet and phone that help keep that number down. 5) Companies will manage their bottom lines, revenue be damned. If ESPN can cut costs (rights, headcount, production, distribution) as it loses revenue, there's still hope. Maybe its not as huge of a profit, but it can hang pretty close and probably become significantly more capital efficient. *I worked at ESPN as a Director of Finance & Strategy, and founded Fanvibe (YC S'10) that partnered with the NBA, NHL, and Comcast. And I can't wait for unbundling. |
That first non basic tier has options for me. There are two versions of it, one with kid's shows and one with ESPN. So if I want Nickelodeon and ESPN, I have to jump up another tier and I'm not paying $80 a month and I still don't get Game of Thrones.