Cable CEOs, despite market volatility over the past few months, showed their love for the bundle last week, defending broader packages of programming over so-called skinny content lineups that have gained an increasing amount of popularity with pundits.
While skinny bundles have been around for a while, their impact wasn’t taken seriously by Wall Street until The Walt Disney Co., in its fiscal third-quarter conference call, reduced guidance for its cable operations — particularly sports juggernaut ESPN — because of what it called a slight decline in its subscriber base. Investors took that to mean the impact of skinny bundles, over-the-top video offerings and cord-cutting was even greater than had been feared, sending stocks down a hole during the first week in August that they are still trying to climb out of.
Disney was hit the hardest, dipping as much as 21% during the first three weeks of August, from $121.69 per share on Aug.4 to $95.36 on Aug. 24. September has proven to be a less-volatile month — the stock closed at $102.60 on Sept. 10, but the shares are still down about 15% since Aug. 3.
DISNEY: MARKET OVERREACTING
At the Bank of America Merrill Lynch Media, Communications & Entertainment conference in Beverly Hills, Calif., Disney chief operating officer Tom Staggs, who many believe is the heir apparent to chairman and CEO Bob Iger, faced the issue head-on. Staggs said the stock-market response was an overreaction, though he conceded that the programming landscape is changing.
“As the market evolves, I think we’re going to continue to see new entrants, we are going to continue to see demand for our programming services, and they will continue to be an important part of those services actually being successful in their launches,” Staggs said.
Sporting events, he added, continue to be the most compelling programming on live TV, but also on other platforms. Staggs pointed to the Sept. 8 U.S. Open tennis quarterfinal match between sisters Venus and Serena Williams, which was ESPN’s second-highest-rated tennis match ever. Viewership for the tournament was up 60% across digital platforms for the weekend and the number of devices accessing ESPN was up more than 50%.
“We continue to see viewership across those platforms grow,” Staggs said, adding that viewers who access content across multiple platforms watch TV four times more content than those who just watch linear TV.
“One reinforces the other, and I think people sometimes think of this as more of a zero-sum game than is appropriate,” he said. “We continue to believe in the bundle and we will continue to look at ways to enhance the value of that.”
Time Warner Cable chairman and CEO Rob Marcus was more blunt, adding that when faced with the option, most customers pick the thicker programming packages.
“The headlines over the last several months have been way ahead of the facts,” Marcus said. “We’re not seeing this mass migration to skinny bundles.”
He added that at TWC, 82% of new customers in the second quarter opted for the “fattest of the fat” bundle.
Steve Burke, CEO of Comcast-owned programmer NBCUniversal, said that declining ratings and skinny bundles cannot erase the fact that more people are watching than ever before. “They’re just watching it in places that many times aren’t rated, that aren’t monetized,” he said.
Burke also pointed to the recent market selloff, adding that in the current climate, small concerns are magnified.
“When 21 million people every month pay you a check of $100 and they are consuming your products [for] hours and hours and hours every day, these marginal changes get amplified,” Burke added. “I think when $50 billion in market cap flies out the window in a week, it’s an overreaction. I think these businesses are very robust and we will be around for very long time, they will just have lower growth rates than they’ve had in the last five or 10 years.”
SOME LIKE IT SKINNY
On the flip side, CBS CEO Les Moonves said he welcomed skinny bundles and alternate forms of packaging, mainly because as the top broadcast network, CBS is usually included.
“The average cable bill is $99 [per month],” Moonves said at the conference. “It’s inevitable that people will be tired.”
Either way, Moonves said, CBS will get its fees.
“If it slips from a large to a small bundle, we will get paid more,” he said. “If everyone watches over the top, we will get paid more money. We’re not selling 30 channels people don’t want to pay for.”
