Analysis: New screens, old strategy. Streamers like Netflix, Apple turn to good old cable bundling

• Streaming companies are turning to bundling as a strategy to retain subscribers amid the industry’s post-pandemic slump.
• The revival of bundling is also beginning to disrupt sports TV.
• People tired of keeping track of their subscriptions to multiple streaming services will likely benefit from simpler bundling options.

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More streaming companies turn to bundling as the industry faces economic headwinds.

Comcast CEO Brian Roberts announced on Tuesday that the cable giant will partner with Netflix and Apple to offer a new streaming bundle that includes Peacock, Netflix, and Apple TV+ at a discounted price. The news prompted another round of variations on what has become an increasingly familiar joke about streaming services: The new model for watching television is beginning to look a lot like the cable packages of yesteryear.

Streaming giants are turning to bundling as a strategy to retain subscribers amid the industry’s post-pandemic slump. “We’ve been bundling video successfully and creatively for 60 years,” Roberts said at an industry conference in New York on Tuesday. “This is the latest iteration of that.” Currently, Peacock Premium, Netflix standard with ads, and Apple TV+ would cost $23 a month—$25 after Peacock raises prices this July—to purchase separately. Comcast didn’t announce a price point for its new bundle, but Roberts claimed it will “come at a vastly reduced price to anything in the market today.”

What’s driving the ostensible competitors to partner? Netflix and Apple are looking to gain additional subscribers who are less likely to cancel their subscriptions – or churn, to use industry lingo. Comcast gets a subscriber boost to its streaming platform, Peacock, while bolstering the company’s broadband and cable TV business since only subscribers to Comcast’s Xfinity Internet and/or Xfinity TV will be able to access the discounted bundle price. 

Tuesday’s announcement is just the latest in a string of similar moves. Warner Brothers Discovery (WBD) and Disney revealed last week they’ll begin offering a bundle of their own this summer that includes Max, Disney+, and Hulu. The first-of-its-kind inter-company deal follows Disney’s intra-company bundle with Disney+ and Hulu fully launched in March – Disney completed its takeover of Hulu from Comcast last fall. “On the heels of the very successful launch of Hulu on Disney+, this new bundle with Max will offer subscribers even more choice and value,” Joe Earley, the head of direct-to-consumer operations at Disney, said of the partnership with Max. 

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JB Perrette, CEO and president of global streaming and games at WBD, said the deal “will help drive incremental subscribers and much stronger retention” and “presents a powerful new roadmap for the future of the industry.” WBD had already combined its in-house HBO Max and Discovery+ services under the Max umbrella last year. 

The revival of bundling is also beginning to disrupt sports TV. Disney, Fox Corp, and WBD announced in February that they plan to launch a combined sports streaming service later this year that is accessible to ESPN+, Hulu, and Max subscribers. As Tyler Hummel wrote for the site earlier this year:

"The new sports merger comes as companies are trying new approaches to growing revenue through their subscription services, while traditional cable packages struggle to maintain their relevance.

The strength of this sports merger may be that up to this point, “cutting the cord” and switching to streaming services has meant piecing together individual services – especially with sports – to get complete access to channels offered on traditional cable packages. But those individual subscriptions add up, and the merger takes a page from traditional cable companies’ playbook."

How did the industry get to this point again? Way back when cable companies dominated TV, selling consumers a big bundle of channels and content at a higher price, sometimes with hidden fees and rigid annual contracts. Television watchers didn’t necessarily care about having access to 100-plus channels, but buying the bundle was the price of entry to get the channels they did want. More than 90 percent of TV households had a pay-TV (e.g., cable or satellite) subscription as recently as 2010, when the average monthly cable TV bill was $75.

But Netflix – which started out as a pioneering DVD-by-mail rental company – launched its streaming service in 2007, and its subscriber base quickly shot upward. For a paltry monthly fee, you could get access to a growing library of movies and television on-demand and, eventually, original content produced by the company – all free from ads. A flood of customers became “cord cutters,” pivoting from cable to streaming. Broadcast and cable TV accounted for less than half of U.S. viewing time for the first time ever last summer, and cable companies continue to hemorrhage millions of customers each year.

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Netflix was the starting gun for the so-called “streaming wars,” and companies like Amazon, Apple, and Disney wanted in on the action as former cable customers transitioned to streaming. New entrants contributed to a glut of new content with companies spending hundreds of millions of dollars on huge hit shows like Stranger Things. The eight largest streamers currently offer close to 40,000 TV shows and films, according to Reelgood, a streaming data aggregator. But the competition has hurt profit margins and customers have proven fickle, frequently canceling their subscriptions and sometimes only resubscribing after a new season of their favorite show comes out. 

Streaming companies felt the squeeze from Wall Street in 2023 as pandemic-fueled subscriber growth dried up, and with the high-interest rate environment, investors started asking where the profits are. Netflix excepted, most streaming platforms are operating in the red as they prioritize growing their subscriber base. Peacock saw $2.8 billion in losses in 2023, and Paramount+ lost $286 million in the first quarter of 2024 alone – although that represented a marked improvement from a $511 million loss in Q1 2023. Disney has lost billions on streaming since it launched Disney+ in 2019, but its latest earnings report indicated the company is close to breaking even on streaming on a quarterly basis.

“I think what happened in the 2010s is the industry went down a very dangerous financial path of trying to invest in every type of content in every genre to try and be something for everyone,” WBD’s Perrette said last week. “And at the end of the day, we know where that led us to.” Executives at rival companies agree. “As we got into the streaming business in a very, very aggressive way, we tried to tell too many stories,” Disney CEO Bob Iger said yesterday. “Basically we invested too much, way ahead of possible returns. It’s what led to streaming ending up as a $4 billion loss.”

Streaming companies are searching for new business strategies to get them closer to the black. This includes cracking down on password sharing, raising subscription prices, introducing ads to the platforms, and now, bundling with competitors’ offerings.

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But industry analysts argue that the revival of bundling doesn’t necessarily signal a return to the rigid days of frustrating cable packages. “Some people say that this sounds just like cable,” Jason Cohen – CEO of MyBundle, a platform that helps customers find the best combination of streaming services for their needs – said in March. “But the people who say that probably haven’t had cable in six, seven years and don’t realize how expensive cable has gotten. The second thing is that the cable bundle was one-size-fits-all. There might have been two or three tiers, but it was, ‘Here is what you get,’ versus this new world of really picking and choosing what you want.”

People tired of keeping track of their subscriptions to multiple streaming services will likely benefit from simpler bundling options. “It was always a bundle,” Joe Marchese, a venture capitalist and former ad-sales executive at Fox Networks, said Tuesday. “Do you watch everything on Netflix? No. That means that you’re subsidizing the stuff you weren’t watching.”

“But now people have to choose between a lot of different streaming packages,” he added. “And everyone is going to be in the fight to be the re-bundler. Everybody will want to be that ultimate bundle.”