NYC TV Week: Analyst: Video Bundle Will Be ‘Pruned’

Days of Double-Digit Affiliate Fee Hikes Over
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NEW YORK -- The increasing popularity of subscription video-on-demand services, over-the-top offerings and a trend toward thinner video packaging suggests that the existing content model will have to be altered, according to a top media analyst, but that will come at the expense of exorbitant rate hikes for programmers.

“The video bundle will have to be pruned,” said Bank of America Merrill Lynch media analyst Jessica Reif Cohen at the Next TV Summit here Wednesday. “The days of double-digit affiliate fee increases are over. I think there will be price roll backs or channels will be dropped.”

In a sweeping conversation with Multichannel News and Broadcasting & Cable editorial director Mark Robichaux, Reif Cohen said that although so-called skinny bundles are all the rage – smaller video packages from Sling TV and Verizon FiOS have grabbed headlines over the past six months – they aren’t economical enough to make a dent in the traditional programming model. Reif Cohen echoed what other analysts have said regarding smaller video packages – they’re too expensive when stacked up against the traditional offerings from cable and satellite services.

But Reif Cohen said that superiority probably won’t last forever – she added the traditional bundle should remain intact for three-to-five years. And when skinny bundles to begin to make a dent in the traditional model, Reif Cohen said the service that is likely to come out on top is one owned by three top traditional programmers – Hulu’s Comcast, 21st Century Fox and The Walt Disney Co.

“They have it all,” Reif Cohen said of the Hulu service.

Outside of OTT competition, programmers that have stumbled have done so because they failed to invest in the business and reinvent themselves, Reif Cohen said. She pointed to Turner Broadcasting System as an example of a network that took a proactive stance, investing heavily in an NCAA Men’s Basketball partnership with CBS that had some high initial upfront costs but in the long run has proven to be successful.

“Turner was smart,” Reif Cohen said. “They invested early, took their losses and now look how well they’re doing. They went for a marquee product that you had to watch live.”